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One million dollars isn’t what it used to be, but, hey, most of us still think that it’s the amount of cash we should all work for in order to call it quits from punching in at that crappy 9-to-5 gig every morning. First off, if one million dollars is your goal, you’re aiming way too low in life, because there’s a good chance that, at some point, you’ll end up broke once you hit that target. Second, while hitting that mark might sound awesome, if it means you’ve got to waste time by doing a bunch of cheap sh*t everyday to pass the time, wouldn’t you rather still be working to grow that wealth? I definitely would.
Anyway, because one million dollars is still a lot of money, some wealth manager and author of The Latte Factor, David Bach, has a strategy for those who want to hit that millionaire status within 20 years. According to Bach, rather than work into your 60s or 70s like everyone else, why not start stashing away $50 every single day for 20 years to make your bank account flush with that one million dollars? When adding in a compound interest of 10 percent — which you can play around with on this interest calculator — even someone with no money saved up today can hit that mark, it’s just a matter of being disciplined and frugal AF.
Per CNBC:
“I call it the 50-20 formula: $50 a day for 20 years at a 10% rate of return is over $1 million.” If you save for 30 years, based on that formula, you’d have about $3.39 million, he says.
Setting aside $50 a day is a lot, Bach admits. It’s about $1,500 a month, which is more than most people are saving and may be able to save. But if you want to retire on the early side, you need to keep a large chunk of your paycheck.
To be clear, just saving a lot of money doesn’t always get you rich or enable early retirement. “You have to have this money invested for growth,” Bach says. “You cannot put this money in a money market or a CD, where it grows at 1% or 2%. You’ll never build wealth” that way.
“It comes down to: What do you spend?” he says. “How active are you going to be in retirement? Are you going to travel a lot? Are you going to stay in one place? Are you giving money to grandchildren?”
So, yeah, while Bach’s saving strategy obviously adds up over time, there’s just one little problem with the idea: you’ve got to live the most frugal life in order to hit one million dollars in 20 years. That probably means not going on many trips. Not having kids. Not having a family. Not having any unexpected financial problems or debt come up. Basically, Bach lives in a perfect world, which isn’t realistic.
Sure, having one million dollars might sound cool, but if it means you can’t live happily and need to count pennies, what’s the point? Now, on the flip side, I’m down to have one million bucks in my bank account by the time I’m 45 if that means I can take some time away from the full-time grind and start my own business. But if you’re someone who thinks that hitting the seven-figure mark means never having to work again, well, be prepared to be broke as a joke 10 years after your so-called retirement.