Wanna Have a Million Dollars? Start Early

You’re a millennial. I get it. So am I. I love spending money eating out, drinking wine, going to coffee shops, and traveling, but guess what: I also want to be a millionaire when I grow up. Can you really have your cake and eat it to? Yes, but…

You Need to Start Now

Just because you say you want to be a millionaire, doesn’t mean you’re going to be. You have to take the steps to get there. It’s important to start investing while you’re young so that you give yourself enough time to reach the coveted $1,000,000. Want to start 2014 off with a bang? Open a retirement account and get on track to reach a million bucks!

Here’s a chart to show you how much you need to contribute to hit $1,000,000 by the time you retire:

· Age 20: Start investing $200 monthly

· Age 25: Start investing $300 monthly

· Age 30: Start investing $450 monthly

(Please note: I assumed that you started with $0, earned a 7.5% rate of return,

A Good Place to Start

If you have a retirement plan through your work and you receive a company match through your employer, make sure you’re contributing at least enough to get the match. Let’s say your employer will match 50% up to the first 6% that you contribute to your 401(k). If you put in 6%, your employer will put in 3%, but if your contributing less than that, you’re leaving FREE money on the table! Don’t make this mistake!

Real Example for Gen Y

Let’s pretend you are 28-years-old and you earn $50,000 per year. If you contribute 6% of your salary to your 401(k) this amounts to $3,000 per year or $250 a month. Your company matches 3%, which is an additional $1,500 per year or $125 per month. If you earn a 7.5% rate of return, then when you retire, you could have $1,000,000! (This doesn’t even take into account any raises or increases in your contributions). The best part is that the amount of money you invested was only $117,000 plus $58,500 from your employer – the rest was your investment gain! This is why I believe compound interest is the coolest thing ever!

HOMEWORK:

· Sign up for your company retirement plan. OR

· If you’re already contributing to your 401(k), take a moment in to increase your contributions by 1-2%. This small change can make a big difference on your overall balance. OR

· Start a Roth IRA

Another Great Option

Roth IRAs are another great way to save for retirement. Instead of receiving an upfront tax deduction, like you do in a 401(k), you fund the account with after tax dollars. This means when you withdraw the money from your Roth IRA in retirement, you won’t pay taxes on it, since you already did. You can open a Roth IRA at any discount brokerage firm (Scottrade, Schwab, Fidelity, Betterment, etc.). If you’re wondering, “Should I Contribute to a 401(k) or Roth IRA,” then this post might help you decide. Hint: you may want to do both!

Get On Track in 2014!

There’s more to money than investing and retirement planning. Take some time over the holidays to list out your goals and values for the year ahead. Make a plan to create a budget, pay down debt, and build up emergency savings. All of these things are ways to Build Financial Security for Gen Y. If you’re looking for more money tips for millennials, sign up for the Gen Y Planning Newsletter. Don’t you want to be a millionaire when you grow up, too?