A million doesn’t go half as far as it did, but making a million is still the first goal of almost any entrepreneur I meet.
It’s also a target for many savers. At the moment a million is enough to buy you a very nice, fairly inflation-proofed income stream, provided you’re prepared to ride out the volatility of equities.
But what if you’re still 20 years from hitting the target? In that case, inflation strips away the buying power of your horde. You’ll need much more than a million to buy the equivalent income or assets that you could today.
Enter the millionaire calculator, the latest addition to Monevator’s growing collection of personal finance tools.
This handy tool enables you to work out:
- When you’ll make your million, based on current savings and returns.
- How much you need to save to make a million by a particular age.
The rate your savings grow is shown in a pretty graph, which really demonstrates the power of compound interest.
There are also three currency options, so everybody can use it.
Understand the effect of inflation
Unlike with some calculators I’ve included an inflation setting in this tool.
Look below the graph and you’ll see what your eventual million is worth in today’s money. The tool also tells you how much you’ll need to save to reach the equivalent of a million today by that target age.
The bad news is you’ll need to save a lot more than you think, but at least the millionaire calculator gives it to you straight.
Finally, play around with the interest rate setting. This is the rate of return. To get a flavor for what’s reasonable, look at my articles on UK historical rates of return, or US rates of return if you’re from over the pond.
If you’re young and 100% invested in equities, a 10% return with 3% inflation seems reasonable to me. Use 8% if you’re cautious.
Two final points:
- Real life is much more volatile than a smooth graph from such tools suggests. It’s best to over-save, and be left with the problem of how to spend the excess!
- While having a target sum like a million can be very motivating, you may be better off looking to grow an income.
I hope you enjoy the millionaire calculator. Send a postcard when you make it!
Also check out the mortgage repayment and compound interest calculators.
{ 4 comments… read them below or add one }
Okay, Monevator… Inflation is totally killing my wanna be a millionaire buzz.
I really do enjoy this calculator. It’s very handy and efficient! Thank you for adding it to your personal tools!
.-= Money Funk on: How to Control Emotional Spending =-.
@MoneyFunk – Glad you like it. Got to tell it like it is — too many people forget about inflation.
Thanks for the feedback.
Like the calculator too.
I take away inflation, b/c there frankly is none… well there is, but not really. In a time of people losing double digits a year easily, inflation is not even part of my registry.
If I have $3 million in 10 years, that’s all I care about!
.-= Financial Samurai on: Only The Poor or Super Rich Say- “Money Can’t Buy Happiness” =-.
We currently live in a dreadfully inflationary environment. Stagflation has been extremely prominent here in the Western world.
I don’t use the benchmark of a million dollars any more. I now have the benchmark of several thousand Silver ounces and a cash flow pattern that exceeds my monthly expenses. Rather, one should focus on “what can this buy me?” Instead of thinking in dollars. Especially US dollars.
.-= Aury (Thunderdrake) on: Movie Review- Prince of Persia- Sands of Time =-.
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