5 ways to slowly but surely become a millionaire

by Nick on January 11, 2012

Slowly but SurelyOver the last 20 years (1992 through 2011) we’ve had a bunch of ups and downs.  HUGE ones (think tech bubble in early 2000s and the Great Recession).  Despite those ups and downs the Dow Jones Industrial Average has averaged a return of 9.4% during that time, including dividends. 

I know that return seems outrageously high right now, but we’re in the middle of a tough time.  If I asked you what you thought the expected return would be after three years of 33% returns, you would probably not kill me for saying 9.4%, right?  So let’s just go with the actual 20-year return.  Here are five things that you can do now to position yourself to retire a millionaire assuming you invest the money in an account that mirrors that 9.4% return.  Remember you don’t need to beat that return, just match it.  A DJIA index fund would have done the trick over the last 20 years.  And Dave Ramsey thinks a long-term 9.4% is low.  So let’s go with the 9.4%.
So you want to slowly save a million dollars.  Here’s how:
1.      Max out a Roth IRA every year.  A Roth IRA maximum contribution is $5,000 if you’re under 50.  Approximate years until you’re a millionaire: 33.
2.      Sell your car, buy a clunker and continue to make your car payment to yourself.  According to Dave Ramsey, the average car payment is $475 per month.  Approximate years until you’re a millionaire:  31.
3.      Start now and just auto-invest $500 per month.  Yes, now.  Open a new window and set up an auto-withdraw from your checking to a low-fee index fund and choose to reinvest the dividends.  Even if you spend every other penny you earn, but get the 9.4% return on this money, the approximate years until you’re a millionaire are just 31.
4.      Max out your 401(k).  I like this one a lot, especially if you have a match.  It’s not the best retirement option because of higher fees and fewer investment options, but because you set this up with your employer and have it come out of your check before the direct deposit even hits your bank, it’s easy for people to set up.  The annual max is $17,000.  Approximate years until you’re a millionaire:  20.
5.      Get a “million-dollar part-time job.”  This is really fun.  It’s not as “easy” as the others because it is time consuming.  But the idea is to get a job working 10 hours per week doing something you love or something where you can be social and enjoy the people around you.  If you can earn $100 per week doing this and invest it all automatically that’s $5,200 per year.  When people ask you why you got a second job, just let them know it’s your “million-dollar part-time job.”


BONUS:  Do all of these.  This is tougher and takes a strong commitment from you and your family.  But most of them are relatively easy, auto-pilot investments.  They’re a way for you to “trick” your mind into saving more and spending less. 


If you can manage to max out your 401(k) and a Roth IRA, auto-invest $500 per month, get rid of your car payment, paying yourself that amount instead, and get a million-dollar part-time job making $100 per week and invest that money with a 9.4% return (reinvesting the dividends) the approximate time until you’re a millionaire is just 13 years. 
Remember, to do all of these, it’s a lot of money (you’re investing almost $40,000 per year!).  But only one of these takes any significant time (the part-time job).  The others are just auto-pilot and spending less.  If you don’t think you can save that much try running a budget with no debt payments (other than your home) and subtract $3,000 per month from your take home pay for your “2025 Millionaire” fund.  I think you’ll find that it’s pretty doable with no payments.  So if you’re in debt you have to kick it into high gear and get out. 


Go ahead and rip me as unrealistic for suggesting doing all of these or earning 9.4% in the comments, but don’t forget that any one of these can slowly make you a millionaire and the 9.4% is a real number…

Remember, the picture is a snail.  It’s not a Ferrari.  We’re talking about slow and steady savings and investing over the loooooooong term.

Until next time, put your credit card down and slowly step away from the mall!

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Image: m_bartosch / FreeDigitalPhotos.net

{ 17 comments… read them below or add one }

ihavetriedit January 11, 2012 at 6:22 pm

I've thought about getting a part time job just for fun (something like a trader joe's position)…but my husband thinks it will just bump us to the next tax bracket and the earnings would not be worth it. What do you think of that opinion?
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trokenmatt January 11, 2012 at 9:35 pm

Yes, put in 30 years, the million dollars will only be worth around $450,000 in today's dollars.


trokenmatt January 11, 2012 at 9:43 pm

Your husband is wrong. The way marginal tax rates work is that if you're earnings cause you to reach a new tax bracket, only those earnings above the threshold are subject to the higher rate, and all of the earnings below the threshold are still subject to the lower rate. So, for example (and these are not actual brackets or rates, but you'll get the idea), if the tax rates are 0% up to $20,000, 10% from $20,001 to $50,000, and 20% from $50,001 to $100,000, if you make $100,000, you are taxed 0% on $20,000 of your income, 10% on $30,000 of your income and 20% on $50,000. If your income rises, only the additional income is taxed at the higher rate, not all of the other income as well. I hope this made some sense.


Nick January 12, 2012 at 12:45 am

trokenmatt is right about how the taxes work. The most your additional income would be taxed is your top marginal federal tax rate plus state taxes, social security, etc. So you're looking at about 40% taxes max on new income if you're at a high bracket. Definitely don't let taxes deter you from making more money.

I would definitely suggest getting a side gig somewhere you actually like to be. If you're going to spend the time working a side gig, make sure you pick something you actually enjoy. I wrote about this a while ago – http://stepawayfromthemall.com/2010/09/actual….

So consider taking the idea one step further. Is there somewhere you spend money at regularly where you can get a discount and/or save money by working? I did it bartending and bouncing. Buddies of mine did it with rock climbing and exercising, working at a rock climbing gym and regular gym. Get creative. Hope this helps 🙂
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Nick January 12, 2012 at 12:51 am

@trokenmatt, you did so well with the first comment what happened!?! 🙂

I know, I know a million now isn't the same as a million, but that's no reason to not save. Plus, it works both ways. $500 per month now may be a lot, but it's easier to save that amount 20 years from now. Also, you can increase the $500 per month to keep up with inflation as your income rises (i.e. increase it by 4% per year average, so year two you're saving $520 per month) and you're an "inflation adjusted" millionaire. You in?
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theFIREstarter December 13, 2013 at 3:07 pm

This is a very good point and something worth remembering!

Especially if/when your pay rises (with or above inflation) then you should “at least” bump up your savings by the same amount – not your lifestyle!

If you start of with a 31 (or whatever) timescale I bet most people can shorten that over the course of a 10, 15, 20 or whatever career if they really want to, as pay rises are gonna come.


Nick December 14, 2013 at 6:45 am

Thanks! Yep – many times lifestyle inflation will do way more to eat a nestegg than regular inflation!


Good Cents Savings January 13, 2012 at 6:16 pm

It all seems so doable when laid out this way. Right now I am only doing 2 of these, but this is a great reminder about how important it is to keep them up – even though it's not always easy!


Jeff January 14, 2012 at 3:40 am

Is the author a millionaire?


Nick January 14, 2012 at 4:07 am

Thanks for stopping by and checking in Jeff. The author is happily on his way. 🙂


Nick January 14, 2012 at 4:45 am

Thanks for checking in Good Cents Savings! Great to hear you're doing at least two of them. The beauty of doing these is that it makes it a question of "when" not "if."


Money Infant February 13, 2012 at 10:36 am

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AmericanDebtProject February 13, 2012 at 5:03 pm

Good post! It's the little automatic actions that will add up. I set up automatic savings for the first time in my life. I'm going to double the amount ASAP, although it's not close to $500, it will be…
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Kooz February 14, 2012 at 11:27 pm

Love this point! Yeah, it's true–and being a millionaire isn't what it was when we were growing up…
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Stacie December 4, 2012 at 1:56 pm

Not sure people think its great to gamble your hard earned inflated dollars in the markets. 401k’s- hmm have any if u ever really read the fine print on those. It’s not ur money. Period.

Don’t believe me- just try to take it out before ur 65. And try to take all of it out. Not gonna happen. Even says in the JP Morgan fine print that they own the money & it’s only yours once you hit 65; and after taxes. Think of the taxed amount on $1 million $’s.

This is a gambling shot if you think ur life & jobs will be the exact same for the next 31 years.

U would better saving & not gambling. And saving up tangibles like gold, silver, guns. Our current economic path is unsustainable. That is a fact- not a theory.


Jennifer March 14, 2013 at 11:52 am


What if your take home pay is only $3000 a month. How do I take out $3000 and then do my budget?


Mike Rawson November 17, 2015 at 10:32 am

These are solid ideas, but I’m not sure you’re going to get the 9.4% going forward, so it helps if you have 30 to spare.

But hey, all we can do is plan and save and keep track. One step at a time.


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