How long does it take to become a millionaire?

How long does it take to become a millionaire as a new investor? When investing $100 a month? How about $200 a month?

Similarly, how much would you need to invest every month to become a millionaire in 20 years? How about 10 years?

This post will show you the simple method to answer all of these questions, and show you how to do your own calculations.

How long will it take to become a millionaire given a monthly investment?

Using a simple and free investment calculator which I’ll demonstrate below, you can determine how long it will take you to become a millionaire with a known monthly contribution. 

Before we do the calculations, we have to make some assumptions on the future growth rate.

Based on history, the average S&P 500 annual return is 10-11% from 1926 to 2018 according to Investopedia.

For the purposes of this post, let’s assume that the market will return 10% every year.

Using this investment calculator, you can see that if you started with nothing, it will you take over 46 years to become a millionaire if you were investing $100 a month.

If you invested $200 a month, it would take you almost 39 years to become a millionaire.

Here’s a graph that plots the number of years it will take to become a millionaire vs. your monthly investment.

As you can see from the graph, and intuitively, you can reach millionaire status quicker by making a larger monthly investment.

How much will you need to invest monthly to become a millionaire given the number of years?

The same chart can be used to calculate the monthly investment to become a millionaire given a number of years.

For example, if you want to become a millionaire in 20 years, looking at the chart, it would take roughly a $1500 monthly investment. 

If you want to become a millionaire in 10 years, it would take roughly a $5000 monthly investment.

If you want to become a millionaire in 5 years, it would take roughly a $13,061 monthly investment.

How to become a millionaire overnight

Sorry there is no realistic investment strategy to become a millionaire overnight unless you build a highly desirable skill (like signing a professional sports contract) or playing the lottery (not recommended). The near surefire method to become a millionaire is through consistent investing and exercising patience.

There is no good reason to expect yourself to become a millionaire overnight. Why exert all that pressure on yourself?

You don’t need to be a millionaire in your 20s or 30s. Statistics show that most millionaires are between 50 and 79 years old! Source: Statista

In the United States, the median age to become a millionaire is 61 years. Source: Go Banking Rates

Starting young increases the likelihood and the rate at which you will become a millionaire.

If you are 30 years old, becoming a millionaire by 50 is highly achievable. As I mentioned earlier, you can become a millionaire in 20 years with roughly a $1500 monthly investment. 

The Power of Compound Interest

The downside of investing just $100 a month is that it will take you 46 years to become a millionaire. The upside is that most of your money at the end of the period will come from compound interest, rather than your contributions. 

As you can see in the chart, the more you contribute per month, the proportion comprising compound interest drops.

Contributing $100 a month, it will take you 46 years to get to $1,000,000. 94% of your money will come from compound interest, while 6% will come from contributions. 

Contributing $200 a month, it will take you 39 years to get to $1,000,000. 91% of your money will come from compound interest, while 9% will come from contributions. 

All this means is that the longer you time horizon, the more your money will grow as a result of compound interest. The key to building wealth is truly to invest early and often.

Diminishing returns?

Given how compound interest works (explained further in my article here), you can see that the biggest drop in the amount of time it takes to become a millionaire comes from the first $1000 or so of monthly investment. 

At $1000, the slope of the curve starts to even out quite a bit.

What do I mean?

If you’re investing $100 a month, it will take 46 years to get to a million.

If you’re investing an additional $900 a month (to $1000), it will take 23 years. 

The additional $900 a month decreased your time to get to a million by 23 years!!!

BUT, if you then invested an additional $900 a month (to $1900), it will take you 17.3 years to get to a million.

You can see that the first $900 increase cut the time to get to a million by 23 years, while the second $900 a month increase cut your time to get to a million by ONLY an additional 6 years.

The first $900 increase has a much bigger impact on shortening the time it takes to get to $1 million, much more than any additional $900, due to compound interest. 

This is because the money you invest today grows exponentially faster than money you invest 10 years from now.

So remember to invest early and often if you want grow your nest egg and achieve financial freedom.

How most people become millionaires by investing

Becoming a millionaire is not easy. It takes discipline to live below your means and invest the rest.

Even though becoming a millionaire is not easy, it is fairly predictable and straightforward. Once you realize that the stock market is likely to go up over time, all you need to do is make consistent contributions to your investments. With a little patience, you have a really good chance of becoming a millionaire.

Use an investment calculator to determine how long it will take you to become a millionaire, or how much you need to contribute over a period of time to become a millionaire. 

Now let me know your thoughts!

Do you think (or know) that you’ll become a millionaire someday?