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How to Save a Million Dollars at Any Age: 25 Years Old

This article was written by in Saving. 9 comments.


Kiplinger’s Personal Finance Magazine’s February issue has suggestions for saving a million dollars, whether you’re 25, 35, 45 or 55 years old. The authors assume that you’ve already been saving money every year, but provide a strategy to add $1 million to your net worth over time.

At Age 25

* Contribute enough to your 401(k) to take advantage of the full employer matching contributions. Look at it as free money or an instant 100% return (if your employer matches your contribution dollar for dollar).

* Allocate your entire invested funds into a broad selection of stocks. A long time horizon means you have time to weather the fluctuations and risk of the stock market, but the diversification you would get from a broad-based index mutual fund will make sure you’re not overexposed in a certain stock or industry.

* Pay down credit cards. Better yet, don’t have any credit card debt in the first place. If it’s too late for that, switch to an all-cash spending plan until you’re able to spend less than you earn and divert extra cash to debt to avoid as much interest expense as possible. To get out of debt as efficiently as possible, check out the better snowball method.

* Set up an emergency fund. As I pointed out recently, an emergency fund should be more than just a savings account. However, getting several months’ worth of expenses in a liquid account is the first step. This should be a priority.

25According to the Kiplinger article, if you start saving $286 per month at age 25, assuming an 8% average annual return, you will have $1 million by age 65. Having forty years to work with is helpful. The longer you wait, the more difficult it will be to reach the same goal.

When I was 25, I was working at a non-profit organization with a long commute. I was not making enough money to save $286 per month when considering rent, travel, and food expenses. While I liked working there, I was finding myself in worse financial condition each month. It took some shaking up before I was able to get myself on track.

Image credit: soylentgreen23
How to Make a Million at 25 [Kiplinger's Personal Finance]

Updated January 16, 2010 and originally published February 1, 2008. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 9 comments… read them below or add one }

avatar Lily

But assuming 3% inflation, you’ll have to save more than $900 per month to get to $1 million in purchasing power at age 65.

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avatar Luke Landes ♦127,535 (Platinum)

Great point, Lily. I bring that up all the time. $1,000,000 won’t do as much for you 40 years from now as it does now.

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avatar Jason Unger

I hate these kind of articles (not from you, Flexo, but from pf media).

Of course if you start doing the right things earlier, you’ll have more money down the road.

The story isn’t able “How to Make a Million at 25″ — it’s about starting to save when you’re young. And doing the right things with it.

I’m 24 and my wife and I save around $1500/month. We’re on the right track. But, like Lily said, $1m in 40 years isn’t going to mean anything to us.

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avatar Dan

$1M in 40 years is equivalent to $259,500 in today’s dollars. Not rich, but better than many retirees.

Jason, if you continue to save $1,500 per month, you will have over $5.2M when you turn 64, if you earn Kiplinger’s 8% APY. That’s the equivalent of $1.3M in today’s dollars.

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avatar Adfecto

It is important to realize that as you get older and progress through your career (and as your salary grows with inflation) the amount you are able to save goes up drastically. Each year take at least half of any raise you get and use it to increase your retirement savings until you get to at least 10% (my goal is 20%). Then each successive year increase the dollar amount you save to maintain that percentage.

I ran the numbers for this scenario and they are pretty compelling. If you are interested I made a full post about it on my blog.

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avatar Christian

I am 31 and have saved $450,000. I just started making about $85,000 per year Gross. I have not nvested in the stock market nor did I take on any investments that have an element of risk involved. Instead, I simply put my money in online savings accounts and CDs. Obviously, saving in CDs and online savings accounts alone will not get you to a large nest egg. It is a safe help alone the way, but what really got me to my $450,000 savings was my dedication and persistance to saving. I always pay mysef first and have lived way below my means since I started earning a paycheck after college. Although I can afford a nice car, I continue to drive my 1997 honda Civic (same car I had in college), and when it dies, I will buy another used car. I have no pitty for folks who drive luxury/high end sports cars, always have the latest and greatest I-phones or other gizmos, eat out 3 times a week, rent upscale townhouses and then claim they are not able to save any money. Folks, live below your means for 20 years, from the day you graduate college until the age of 45. When you reach 45, you will have over a million dollars saved and a home paid off. Then you can retire from your job at 45 years old and work part time if you get bored. Our society whats everything tomorrow and the 99% think that they should be entitled to everything without workng and sacrificing for it. It takes time, effort, and true dedication to get ahead in this world. There are no shortcuts. Be smarter folks.

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avatar Recent Colllege Grad

Christian you make a really great point. And my intuition always lead me in that kind of thinking because If I can try to speak for everyone or at least most at age 25 that we are barely learning about or at least beginning to have a grasp about thinking 20+ years ahead.

Right now I make approximately $17,500 annually after taxes as a recent college graduate coming (sad), live on my own, manage to save 20% of my income per paycheck totaling to $292.00 month for four months up-to-date, not paying all my loans, but selecting one’s that has the highest principal balance and highest interest rate and will continue to pay to the lowest until all paid. Now, I know that doesn’t even come close to 1million in savings by 65, but it will at least get me to 100,000 in 40 years. But doubling my salary hopefully within 5 years makes a double in amount of savings….and another additional few thousand in my salary means a triple in my savings. 5 years saving around 300/month at the end of age 29. then another 10 years saving double that at the end of age 39, then another 26 years saving triple that at the age of 65….is around $360,000 dollars in savings without any risk investments. This is NOT even including 8% annual return or whatever 401(k) employer match or other 401(k) plans I read and try to understand online. With economy inflation….I know my salary will reflect that as any labor wage amount would….so I’m not really worried. Just trying to enjoy life in a smart and fun kind of way. Thanks for the article and everyone’s opinion. I’m a first generation college student so it’s quite difficult finding quality life information. *smiles*

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avatar Recent Colllege Grad

haha I meant to say Recent College Grad (mispelled there)

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avatar MB

Assuming you graduated college at 22, you would need to invest somewhere baround $35k/year @ 8% interest to have $450k by age 31. At 2% – probably closer to what you’ve earned in CDs and money markets – it’d be closer to $45k/year.

Not impossible…but does require poverty living conditions combined with a $60k/year salary.

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