It’s interesting how difficult we think it is to make money and build wealth for ourselves.  Society tells us that you’ve got to be someone special to become a millionaire – like super smart with a 6 figure job, or a talented professional athlete or a famous singer.  It’s for “other people” but not for the person who’s working hard to make a living.

And that’s where I beg to differ.  Absolutely ANYONE has the potential to become a 401(k) millionaire using what I call the Triangle of Wealth.  The triangle has 3 points to it:   (1) time  (2) an invested rate of return and (3) monthly savings.   In the Triangle of Wealth, the more you have of one point, the less you need of another.  We all focus on how MUCH we can save each month, but we totally ignore the power of Time and Invested Return to grow our money for free.  If you can’t save a lot, then boost your wealth with the other 2 points.

Allow me to elaborate…

1. Time: There is a concept called “time value of money” which simply means that money grows and turns into more money the LONGER it is invested.  Nothing you need to do on your part but just leave it alone.  So the sooner you get started saving – ANY amount – the less of the other 2 Triangle Points you’ll need. 
2. Invested Rate of Return: Your 401(k) investments need tending to, just like a garden does.  Do NOT set it and forget it for a decade.  By creating a diversified mix of mutual funds and rebalancing at least twice a year, you have a tried-and-true way to increase the amount of free money your money will make for you.  With a 3% return, it will take 24 years to double your money.  With a 7% return, you can do it in 10 years.
3. Monthly Savings: If you’ve focused on the first two points of the Wealth Triangle, you’ll be amazed at how little, honestly, you need to save to create your $1 million.   Throw in the 401(k) employer match, and it’s even less out of your own pocket!

Here’s an example I made to show you how maximizing just Time (with a pretty middle of the road invested return) lowers the amount you need to save to reach your $1 million 401(k).

Now here’s another example where I’ve improved BOTH Time and Invested Return, to show you how little you really have to save every month to become a 401(k) millionaire.

Shocking, isn’t it?  ANYONE can do this.  Isn’t it refreshing to know you don’t have to save 15% of your paycheck like all of the talking heads say you do?  😊  

[Sidenote: To give you a frame of reference on invested returns, the S&P 500, which is a typical example of how the US stock market performs, has returned an average of 11.36% over the last 40 years, with dividend reinvestment.  (Source: officialdata.org) So 8% is not shooting for the moon.]

Here’s a great 401(k) calculator where you can play with your own numbers to see how little you’ll need to save to hit your $1 Million mark: Nerdwallet 401(k) calculator

"I don't look to jump over seven-foot bars; I look around for one-foot bars that I can step over." — Warren Buffett

Wishing you wealth and success,

Yvonne

P.S. If you found this helpful, forward it to a friend or family member!