4 Ways to Save $1 Million During Your Life
The average US salary is a little over $30,000. Over the course of a 50-year career, from 18 to 68, that equates to $1.5 million. And that doesn’t include inflation, promotions, property sales, and investments.
It might seem like $1 million is a long way off, but believe it or not, several million will pass through your hands during your lifetime. If you hold on to as much of that money as possible, you could live the life of a millionaire on a basic salary.
1. Stop Spending So Much
Saying that you will make $1.5 million during your lifetime is a very simplified way of looking at things. After all, you need to live. You need housing, food, clothes. You can’t just save all of that money. You can’t even save the majority of it.
Photo by?Nathan Dumlao ?on?Unsplash
But if you spend your money wisely, you’ll tip the odds in your favor.
Think about the purchases you’re making. If there are cheaper options, take them. If you can do without, don’t buy.
For example, every year the average person spends:
If we combine all of these things and calculate over 50 years, that’s $408,000.
Stop buying groceries you won’t eat, start cooking more and dining out less. Stop smoking, stop gambling, and make your own coffee. Doing so could save you a fortune.
And that’s just scratching the surface.
If you opt for generic instead of branded, and if you stop wasting money on frivolous items, you could easily save over $750,000 during your lifetime.
2. Avoid Debt
The average American will pay over $130,000 in interest during their lifetime, and in states like California, it edges closer to $240,000.
Photo by?Ehud Neuhaus ?on?Unsplash
Debt seems like an inevitability, but it’s crippling, and it’s one of the biggest things holding you back. In most cases, the reason it seems inevitable is that we can’t differentiate between “want” and “need”. You “need” to pay the bills this month and to put food on the table. You “want” that new games console, cell phone, or pair of shoes.
Every time you acquire debt to buy something that you don’t need, you’re doubling down on a bad decision. Breaking that cycle is key if you want to save tens of thousands during your lifetime, but there are other options as well.
Take your mortgage as an example.
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It’s the biggest debt that most of us will have, and yet many of us don’t know how they work.
A mortgage payment includes the principal and the interest. The latter is completely lost money that the bank pockets, and it also constitutes the bulk of your early mortgage payments.
As the mortgage progresses, a larger percentage of your monthly premium goes to the principal, and the result is that most of the debt is repaid in the final third. In other words, if you make it to the halfway point in a 30-year mortgage, you haven’t repaid half of the debt and have just lined the bank’s coffers.
But there are some ways to change this.
Firstly, increase your down-payment and shorten the term by as much as possible. Secondly, put every extra cent that you have toward your mortgage payment. If your premium is $1,000 and you pay $1,500, the additional $500 will go to the principal, and because of the way these debts are structured, it could mean that you have paid twice or thrice the amount that month.
It can be confusing, but the simple solution is to always add more to your premium, even if it’s just $50 or $100, as it could take thousands off the total interest.
The same is true for other debts. Avoid them where possible, pay them quickly when not.
3. Buy a House
Buying a house is not easy. You don’t need me to tell you that. But the sooner you get this milestone out of the way, the quicker you can save that $1 million.
Photo by?Scott Webb ?on?Unsplash
If it means living with your parents for a few more years and avoiding all luxuries, so be it. If you need to get another job or put your dream vacation on hold, do it. And when it comes to buying a house, don’t set your sights too high. Get what you can, even if it means moving out of the city.
It’ll be easier for some than it is for others, but taking this step means that you’re wasting less on rent and putting all those monthly payments toward your net worth. The average monthly rent in the US is just under $800. That’s $9,600 a year or $96,000 throughout your twenties.
Alternatively, it’s the entire mortgage paid off on a small apartment.
4. Understand Your Value
It doesn’t matter how unskilled you are, you should never work your entire life for minimum wage. Employees often sell themselves short, believing that they don’t have the qualifications or skills to earn anything more, but if you have been doing the same job for 10 or 20 years, you are skilled. You are experienced. In fact, you can probably do that job better than 99% of the people in your city.
Photo by?Guilherme Cunha ?on?Unsplash
That’s valuable, and it warrants a promotion. If that promotion doesn’t come, you should be prepared to move elsewhere.
Avoiding debt, buying a house, and spending wisely can save you 7-figures over your lifetime, but the easiest way is to increase your paycheck. If that means pitching your services elsewhere or?starting a business ?that competes with your previous employers, so be it.
For more information on making money, as preached by countless experts on the topic, check out?This Week With Sabir .