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Want to Become a Millionaire? Save $5 a Day.

by J. Money on Tuesday, March 30, 2010

Millionaire StatusThat’s right folks, all it takes is saving $5 a day to hit Millionaire status! You just have to stay on top of it for 40 years straight ;) Better get started! Haha…

Seriously though, it really is that easy. $5/day = $150/mo = $1,800/year. Multiply that by 40 years @ 10% compounded interest (within a tax-deferred account) and you’ve got yourself a cool Mil! At least according to Money Mag’s Millionaire Calculator, and other sites around town. And sure, you have to account for inflation and yada yada yada, but the point is if you SAVE CONSISTENTLY you will eventually hit your goals of reaching $XXX in the bank.

So if it’s indeed so easy, how come no one does it? It’s just $5 right? I mean, I blow that in lottery tickets & bananas alone every day! Haha….okay, well I’m not that bad, but I def. go through $5 on *something* every day without a doubt.

I think the hardest part here is really a) BELIEVING this will work, and b) putting it into action.

Were any of you around when I shot for that $1/day challenge? I think it might have been one of my very first posts actually :) And I lasted a month, if that. But I think what I did wrong then was physically taking out $1 from my pocket every day and dropping it into a cup @ work. Whenever I had money on me it was fine – even if I had to walk around asking for someone to break a $10 or $20. It was the *remembering* part that killed me. My brain just couldn’t handle it! And when it could, I’d feel bad for missing so many days that I’d then drop a $5 into it or whatever to make up for lost time, and it would kill my mood (even though I still knew it was “my” money).

What I’m trying to say here is that it was all easy in theory, but pretty hard to put into practice. Now if you automated it, we’d be in a whole new ball game! Not on a daily basis because your bank would kill you for it (and you’d get charged up the a$ with who knows what kind of fees), but you could certainly automate it monthly. One $150 deposit straight into your Roth IRA or other investment vehicle every single month! Not only would it be WAY easier to stay on top of, but overtime you’d likely forget all about it… Until you wake up one day – all gray and crotchety-like – and you realize you’re a bona fide millionaire!

And guess what? 99% of you reading this right now can make it happen. So get on it buster! Get motivated, start automating, and join us in the Million Dollar pledge. All it takes is $5 a day ;)


{ 32 comments… read them below or add one }

1 Lulu March 30, 2010 at 9:48 am

It is an interesting concept but not really realistic right now.
Where are you finding this account that pays 10% interest and lets you save so little? From what I have seen you need to have a massive amount of cash (over 10k) to even get 7% interest.

I am all for saving but I expected something more realistic J. Show me the account and I WILL do it.

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2 Damilola March 30, 2010 at 10:09 am

First thing my brain was telling me: $5 a day sounds simple, $150 a month a lot less simple and as the time horizon increased I just thought “Meh :-D.


What I’m trying to say here is that it was all easy in theory, but pretty hard to put into practice

On a more serious note, it’s the discipline and the roadblocks you set up that make the path a little easier. It helps to have people who are trying to do the same thing as well. Hence the reason I will be checking out Million Dollar Club and setting up the page ASAP.

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3 myfinancialobjectives March 30, 2010 at 10:48 am

Good post, no matter how many times you hear this topic shouted from the PF blogs, magazines, and finance gurus on TV, its always a great message to hear. I think that showing how such a little investment can become such a massive accumulation of wealth is a very powerful tool, something I love to calculate. I actually just did some calculations earlier today with some numbers according to a raise and how that would affect paying back loans.

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4 David March 30, 2010 at 10:53 am

How are you factoring inflation? How will you get 10% consistently for 40 years?

Sounds good in theory, but the specifics need to be addressed.

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5 Abigail March 30, 2010 at 10:55 am

Having the money on you physically might be a pain. But if every day you just went to the computer and transferred $5 to a different account, that’s more likely.

You still have to remember. But speaking as the wife of a severe ADHD man, that’s why humans invented alarms! He has alarms to help him remember to do things. He has alarms to remind him to remind ME to do things… It works. And if it helps someone so prone to distraction, it should be useful for the rest of us who are just a little forgetful in the hectic day-to-dayness of life.

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6 AprilFire March 30, 2010 at 10:59 am

I’ve used the $5/day saving method for the past 6 months or so and it’s great! It automatically gets transferred out of my one account into a high interest savings account each and every day and I don’t miss it at all! However, I’m not using the method to save to my first million; I am using it to pay off my debt! If I don’t miss it by the end of the month, it all goes onto one card or another. I’ve managed to pay off 2 store credit cards using this!!!

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7 Lulu March 30, 2010 at 11:14 am

@ Abigail (#6) you actually do not have to ‘remember’ if you set it up in ING to do it for you. Just have ING transfer $35 every week (or however you want to set it up) and the money still gets saved with minimal effort.

This is about making your money work for not about making you work twice for your money. So automate it and then you don’t have to worry about having cash on your body or forgetting to do a transfer.

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8 tom March 30, 2010 at 11:25 am

Man… some of the comments are so picky about your numbers.

Obviously, inflation is not factored in. $1,000,000 is $1,000,000 no matter how you look at it.

Will it buy the same amount in 40 years? No.
Is it still $1,000,000? Yes.
Do you hate it when I ask questions only to immediately answer them? Yes.

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9 Falling Into Favor March 30, 2010 at 11:33 am

You make a good point! I thought about doing something like this last year. I had been mentoring a young girl and she NEVER saved anything. I encouraged her to save a dollar a day, and she did for a few months or so. It’s fun to see how much you have if you save X a day!!

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10 Aaron @ Clarifinancial March 30, 2010 at 1:05 pm

I think the reason the $1/day challenge didn’t work is because you saw that jar as some sort of prison for your money instead of liberating it for future use. When you drop that fiver in the jar, it bums you out because it reminds you of one less banana and cup of coffee for the day – constant negative reinforcement.

Maybe you could do a psychology play on yourself and write “Millionaire Fund” on the jar. When you put $5 in it, think about your calculations; think about the certainty of it all. Then know each day that you put money in, you are one day closer to your goal. One day closer. Put the date on your calendar. You could hide it and automate it, or you could make it a powerful, consistent, visual reminder.

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11 Jenna March 30, 2010 at 1:25 pm

Remember that if you’re investing in the market (via mutual fund, etc.), 8-10% return over the long term isn’t unreasonable. No, you won’t have exactly 10% return all the time, but for lack of knowing exactly how much you will earn each year for 40 years, it’s not a bad assumption if you’re investing your $5/day in the stock market.

I think automation is the key. I find it easier to save if the money gets transferred before it ever hits my checking account. Don’t forget that if you already have a payroll deduction for your 401k, that counts! I’m definitely contributing enough to that each month to qualify. And if I can put that much aside now, I don’t see any reason why I can’t continue to put aside at least that much for the next 40 years!

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12 kt March 30, 2010 at 2:15 pm

i dont want to be a millionare by having a million net, i want to generate millions of dollars from my businesses over a fixed time period, like over a financial year. since we are all obsessed with titles(half a millionaire, millionaire, multimillionaire, billionaire, multibillionaire) accomplishment of this goal would make me a multi-millionaire. i must say, it has a nice ring to it :)

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13 J. Money March 30, 2010 at 3:17 pm

We’ve got some great discussions going on here, love it! Just one note before responding – EVEN if all you did for the rest of your life is put away this $150 a month (although that’s not what I’m advocating here), you will be SO MUCH better off 30-40 years from now. Whether it’s “really” a million dollars, or you get 3% or 8% returns every year, whatever. The simple fact is constant savings builds up over time and allows you financial freedom – there are now down sides here :)

@Lulu – You don’t think you could get 7-10% in stocks or mutual/index funds over all that time? We won’t know for sure until 40 years crawls up on us, but I’m fairly confident we will. But still, even if we got 5% or 0% we’re still talking about thousands and thousands of dollars saved from something small in the grand scheme of things.
@Damilola – Yessir, sound a LOT better having a game plan set up and a community cheering you on.
@myfinancialobjectives – Congrats on the raise ;)
@David – The only details you can have right now is based on your own assumptions and ideas – no one knows what the markets will do ;) All I’m saying is that you invest that $150 away the best way you know how, and the odds of you hitting around $1mil in 40 years is high. If you reach $700k instead, would it still be worth it to you?
@Abigail – I love alarms. I have Google alerts and cell phone alarms set up all over the place :)
@AprilFire – WONDERFUL idea! And great to hear someone’s actually putting this into motion already – well done my friend.
@tom – Haha….do I enjoy seeing your comments every week? yes.
@Falling Into Favor – Awesome! Well done :)
@Aaron @ Clarifinancial – Ooooh I like that “Millionaire Fund” idea… maybe I’ll just create an ING sub account and mark that as my fund? Have it all automated this time around too.
@Jenna – Work it girl. 401(k)s most definitely counts, as long a it doesn’t scare you away that would be another great storage for it. And if you have a great matching plan set up with your company, you could potentially then DOUBLE it every month which makes compounding even sicker! You’ve got to be financially stupid not to take advantage of that.
@kt – Haha…yes having your own companies generating cash like that would be a most wonderful thing. Ya gotta have goals!

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14 Investing Newbie March 30, 2010 at 6:10 pm

With my contribution amounts to my 401K, I think I’m on par to become a millionaire too by retirement! Already dreaming of the tricked out nursing home…

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15 Ciawy March 30, 2010 at 11:11 pm

I hear you about blowing $5 on bananas and lottery tickets. Like anything else we want to accomplish, we really DO have to be consistent. I’m sold. Will be setting up automatic transfer now. ;)

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16 StackingCash March 31, 2010 at 12:07 am

Hmm, how come no one mentions -10% rate of return because it can happen. Read those disclaimers people! As far as savings goes, as long as you can guarantee no losses, rock it!

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17 Monevator March 31, 2010 at 8:16 am

According to my calculations you’d only have $876,333.26, though perhaps it depends on whether you’re able to earn interest on that $5 straightaway (I’ve assumed $1800 at the end of each year).

Still the principle is very true, and rarely followed. Even better to save $10 a day and get there while you’ve still time to enjoy it, although it will still take you 35 years.

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18 Lulu March 31, 2010 at 10:42 am

@ J that is a LOT of bananas!!!!!!!

We will just have to check back in 40 years to see but I prefer short term and with all the fluctuations I am not seeing it happening.

I can’t believe you did not already have your Millionaire fund sub account in the lovely ING….hop to it!!!!!!

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19 J. Money March 31, 2010 at 10:48 am

@Investing Newbie – Haha, can I join you there?
@Ciawy – Rock on!!! You’re going to be SO MUCH happier down the road by doing this :)
@StackingCash – Not sure what you meant exactly by your comment, but the point of this whole exercise is to save consistently over the years so you get a hefty some down the road :)
@Monevator – Yeah, as I mentioned earlier there is no way to tell exactly what rate of return you’ll be getting every year, but whether you ended with $800,000 or $1,200,000 that’s still bad ass for only saving a little at a time. And you can alway stop at 30 or 35 years too to enjoy it all like you mention.

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20 Pauline April 1, 2010 at 12:59 pm

1800 a year x 40 years is not even 100K. The interest rates would have to be amazing to turn that into 1,000,000.

It’s not impossible, but it’s not as easy as you make it sound.

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21 J. Money April 1, 2010 at 10:38 pm

The interest rate on the calculation is 10% – but even if you got, say, 2% it would blossom like crazy. It’s just about getting starting and STICKING to it.

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22 Bret @ Hope to Prosper April 7, 2010 at 6:53 pm

@J. Money,

When I read about this concept on Marshal Brain’s website a couple of years ago, it took 42 years to reach $1 Million. Maybe, that’s why some of your commenters are calculating up $800K, instead of $1 Million. I personally haven’t run the numbers. But, like you said, it really doesn’t matter. Saving and investing, whatever the amount, is the surest way to wealth.

The commenters who complained about the 10% interest rate or the value of $1 Million after inflation cracked me up. They seem to be looking for any excuse to avoid saving. In 40 years from now, they are probably going to wind up with 100% of nothing.

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23 cm April 9, 2010 at 12:14 am

There’s a huge difference here between two meanings of the word “saving”.

“Saving”, meaning “getting a bargain or not spending” $5 a day each day on purchases will get you, with a 5% (realistic) return, an EXTRA $176,000 in future dollars beyond what you would have banked for retirement without that daily thrift. You might as well try it, because it will likely buy you the equivalent of 2-3 good cars in future dollars.

But “Saving”, meaning “banking” only 5 new dollars a day in your bank account or investments will have you wind up with ONLY $176,000 in retirement, which you cannot live on. Saving, in the sense of banking, only $5 a day is a recipe for future difficulties.

Instead, aiming for one million in 40 years, you should save at least $22 a day. But in truth, you should aim for about three times that to secure a good future. And it’s better to think in terms of yearly budgets, anyway. $22/day is about $8k a year.

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24 J. Money April 10, 2010 at 9:19 pm

@Bret @ Hope to Pros per – Hahaha…that cracked me up dude. very true with some people :)

@cm – yes, saving more is of course always better. the problem with telling people to save $8,000 a year is that it seems too hard to do right off the bat. Even for me, who’s been saving/investing $40,000 a year, it already seems like a lot of work. That doesn’t mean it’s not smarter to do, just that the average person will get scared away.

By leaving it at $5 or $10 a day though, they’ll build up that confidence and more likely than not start contributing even MORE to the post after seeing what awesome results they are getting – at least that’s my take on it. We all handle this stuff differently, but usually starting out smaller gets better results in my experience than with seemingly high goals.

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25 Abbie @ Your Financial Education Tutor February 9, 2012 at 6:22 pm

I’ve been saving $1 a day since July 1, 2011. I’ve really enjoyed it and is now challenging my facebook family and friends to do it with me. I’m not doing it to become a millionaire but it does keep my mind condition to save on a constant. Its like a workout. The more times you save money the more it become habitual.

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26 J. Money February 10, 2012 at 3:26 pm

Haha, yeah it does! I like it – hopefully in a few years you’ll let us know you’re on a record and going for another 40 ;) Keep it up!

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27 daniel July 9, 2012 at 2:35 am

i hate to burt everyones bubble but
5 x 30 = 150
150 x 12 = 1800
1000000/1800 = about 556 .
so it would actually take you 556 years to become a millionaire.
so keep dreaming .

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28 J. Money July 9, 2012 at 9:00 am

you forgot to include the compounding interest ;)

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29 Dim December 26, 2012 at 7:39 pm

Yea but to think the 2nd million will take a fraction of the time

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30 J. Money March 4, 2013 at 8:19 pm

Yup!! That’s the best part :)

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31 steven March 3, 2013 at 11:45 pm

Could workout if you invest money in high dividend yielding stocks, and assume a 1.25% annually. So not too bad of an idea – It certainly can be accomplished.

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32 J. Money March 4, 2013 at 8:19 pm

For sure… just gotta start early and stay on track!

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