This is not a blog telling you how to participate in ‘Who Wants to Be a Millionaire’, convincing your parents to leave you a hefty trust fund or a get-rich-quick scheme. 

On the contrary, this blog will tell you how you can become a millionaire if you start saving in your 20s. You will see how disciplined saving and long-term investment can lay the groundwork in your 20s for a better future through a step-by-step breakdown. The steps have taken into account inflation adjustment and 6-8 percent average annual investment return. 

At the onset, it’s crucial to establish a clear goal: becoming a millionaire. While the term might evoke images of opulence, the underlying principle is achieving financial independence and stability. 

Also Read: Vola Can Help Your Financial Goals With Three Easy Steps 

Understanding the Math

Saving $15 a day may seem insignificant at first, but the magic lies in compound interest. Compound interest is the interest earned not only on the initial investment but also on the accumulated interest over time. This snowball effect can significantly amplify your savings over the years.

Assuming an annual return of 7%, a reasonable estimate for long-term stock market investments, and starting at age 25, here’s how the numbers stack up:

Savings per day: $15

Annual savings: $15 * 365 = $5,475

Calculator credit: Nerdwallet

By investing these savings in a tax-advantaged retirement account like a Roth IRA or 401(k) every year for 40 years, your total investment would be $219000. Thanks to the power of compound interest, your returns would be more than $1.12 million. 

Starting in your 20s affords you a crucial advantage: time. The longer your money has to compound, the greater its potential growth. Depending on market performance and other variables, it’s plausible to reach or even exceed the million-dollar mark.

As you progress towards your goal, periodically review your investment portfolio and adjust your strategy as needed. As your income grows or market conditions change, consider increasing your savings rate or diversifying your investments to optimize returns while managing risk.

Decide your daily investment amount and calculate here. 

Other Steps You Can Take

• Unnecessary Spending and Debt

Every time you feel like purchasing a non-essential item through your high-interest credit card, remind yourself what would happen if you saved it. For example, if instead of spending $30 every month on non-essential items, you had saved and invested it for 40 years. You will get an additional $14400. 

• Passive or Multiple Income Streams

With the rising inflation and uncertain economy, having more than one income source is helpful. This can include having a second job or hustle. 

Weigh your skills, upgrade them through free online courses and start capitalising on them. You can choose from numerous side hustles, from being a dog walker, a tutor, content writer to working part-time in a library and more. 

Passive income streams include assets you can rent or sell for little to no work. Some examples include renting a room in your apartment, renting your branded clothing items or shoes, dividend-paying stocks, selling ads on your blogs, conducting online workshops and more. 

• Stay Alert on Lifestyle Inflation 

Lifestyle inflation is when you start spending more money to keep up with the higher pay. For instance, when people receive a salary raise, they upgrade to a larger house, go abroad for vacations or buy luxury items. 

Instead of saving the additional income, they adjust their lifestyle to consume more, potentially hindering long-term financial goals. By keeping track of your lifestyle inflation,  you can spend less and save and invest more. 

• Build a Money Mindset

It is your mind, at the end of the day, that is the most powerful weapon that can help you achieve your goals. Consider your philosophy and attitude around money. How hard are you willing to work to reach your goal of financial freedom? Ask yourself if your current lifestyle is worth the spending. Work on forming healthy financial habits that will benefit you in the long run. 

The key to wealth accumulation is consistency. By diligently saving $15 a day, you’ll be nurturing your financial future with each contribution. Resist the temptation to dip into your savings for non-essential expenses, and stay committed to your goal.

Saving money is a fundamental aspect of financial stability and security. Modest savings can lead to millionaire status. Put these steps into action now.

Also Read: Do You Know 8 Money Mistakes Previous Generations Made