How to accumulate a million: deadlines, tips and strategies for accumulation
To accumulate a million rubles at first glance seems to be an unrealistic task for many. In fact, today there are many tools for earning, saving and multiplying money. The first thing that is important to do before accumulating a million is to decide on a strategy and start implementing it.
How long will it take to save
For each individual, the duration of the period of accumulation of funds will be different. Its duration depends on the level of income, the amount of expenses and the method of accumulation. Some will easily be able to accumulate a million in a year, others may require 3 or 5 years for this.
Any savings, whether they are savings for a rainy day or for certain purposes, are based on the principle: earn more, spend less, and postpone the difference. When accumulating a large sum, additional components appear: the purpose and inviolability of savings.
How to set a goal correctly
The main difference between large savings and small ones is the presence of an end goal. Anything can act as such. For example, you can save a million to buy real estate, a car, go on a trip or to make a down payment on a mortgage. The goal does not always have a material embodiment. You can buy a million to start a business, or you can save money just like that.
A lot depends on the character and needs of a person. A person who cares about the future will probably want to accumulate a large sum in order to then use it to receive passive income. Conversely, a person who tries to take everything from life is likely to choose a material goal to satisfy his current needs. Whatever the goal, it is necessary that it is important for a person to achieve it.
Calculations and compound interest
Knowing the ultimate goal and the amount of expenses, by simple calculations, you can determine the amount that will need to be postponed. Here is a simple example.
If we divide 1 million rubles for 12 months, we will get an amount of 83333 rubles, not counting kopecks. Of course, a person cannot save all his income, he needs a livelihood. Suppose the monthly cost amount is 40,000 rubles. Unforeseen expenses should also be taken into account. The amount of such expenses is accounted for separately from the amount of savings, but is included in the total amount of costs. Let’s say it’s another 10,000 rubles. We sum up and get that a person should have an income of 133333 rubles every month, some of which will go to the piggy bank, the other part to provide for everyday needs, and the last for a rainy day.
There is another, less painful way: creating passive income, for example, on a deposit, which provides for the accrual of compound interest. To use this method, you need to have capital. Then the person opens an account with capitalization and at the end of its validity period receives the initial amount with an increase.
An account with accrual of compound interest (capitalization) is a scheme of accrual of interest, in which the amount of such is added to the amount of the deposit, after which interest is accrued on the amount received. At the same time, the amount of the interest rate does not change, and the amount for which interest is accrued increases. The final profit will depend on the term of the deposit, the rate and the amount of funds deposited to the account.
What you can save to save a million
Naturally, on expenses, and not only on current ones, but also on unforeseen ones. Saving on the latter implies both a reduction in the amount of deferred funds and a transition to a different level of quality of consumed goods. For example, many people buy cheap shoes, arguing that they save money. But what, for example, will become of low-quality winter boots in the spring thaw? Wouldn’t it be better to buy more expensive shoes that will last for more than one season?
You can also use such tips:
- put meters in order not to pay for utilities according to the standards;
- switch to LED bulbs. They can be operated for a long time and at the same time save on electricity consumption;
- get rid of unnecessary remnants of the past, for example, from a radio station or a landline phone;
- give up too expensive brands in clothes and shoes;
- buy goods (at least some of them) in online stores, tracking the best prices. Even with courier delivery, the final cost will be lower than in a regular store;
- give up semi-finished products, especially fast food. Self-cooked food will help save money and maintain health;
- use within reasonable limits a variety of discounts, cashback, promo codes;
- unsubscribe from unnecessary paid content;
- switch to public transport, especially since in megacities it is faster to get to work this way than by private car;
- give up loans, especially for the purchase of optional goods. For example, a smartphone of the latest model or a game console.
What financial instruments to use to accumulate a million
An ordinary user with one salary will save a million for a long time. Sometimes you can earn the desired amount faster if you use available financial instruments for this. With a successful investment and competent management, the initial capital can be multiplied many times. Of the investment methods available to private investors , we will highlight:
- investing in stocks and bonds;
- Mutual funds;
- PAMM accounts;
- Forex currency market and others.
Deposits are still considered a working option, where, if there is a significant amount, you can earn interest. Of the riskier options for increasing capital, we note earnings on sports betting and cryptocurrencies. Specialists in their industry can always try their hand at freelancing. If you get really high-quality and in-demand content, there will be no shortage of customers.
Special methods of accumulation
These include tactics used in world practice, which help to save money for the most part:
- 6 jugs, the essence of which boils down to the division of income into 6 items of expenditure. The scope and purpose of each of them may vary depending on the needs, but the following principle must be observed here: even if the income is unstable, the tactics of cost allocation does not change (as a percentage).
- 4 envelopes. The use of this tactic involves the allocation of a part of the net monthly income that will go into the piggy bank and for large acquisitions and a part that will be spent on regular expenses. The remaining funds must be divided into 4 weeks and spent without going beyond the resulting amount.
- The latte effect is a tactic based on the rejection of habitual spending. This phenomenon was described by D. Bach, who noticed that his client spends $5 a day on latte coffee. After calculating, Bach determined that giving up a daily cup of coffee gives savings of $ 150 per month, and advised to exclude this line of expenses. Everyone has expenses that are invisible at first glance. If you refuse them, you can reduce costs and send more funds to the piggy bank.
- A safe deposit box tactic involving the regular deduction of a small amount from the main account to another account, for example, a savings account. The write-off can occur in the autopayment mode and remain painless for a person. Meanwhile, funds will accumulate in the reserve account.
- Rounding. The essence of the tactic boils down to daily rounding of the balance to zero. For example, the card balance of 20555 rubles can be rounded up to 20500 rubles, and 55 rubles can be put in a piggy bank. The same should be done with cash.
How to quickly accumulate a million
There are several ways to speed up the accumulation process. You can increase your income by searching for new sources of earnings or investing in risky financial instruments. The second option involves reducing costs up to maximum savings. You can combine both methods, and it will help in this:
- professional development and, as a result, a new high-paying job;
- additional earnings;
- the strictest accounting of expenses;
- rejection of excess, which is easy to do without.
In conclusion, we add that even with a small income, it is really possible to accumulate a million. It’s just a matter of time. One will need a year to do this, the other several years.
Published: 2 October, 2022