Financial blogger Lyn Alden has created a chart that she calls “wealth matrix” showing how much you need to invest each month, for you to become a millionaire after 25 years, depending on a given rate of return.
If you have, for example, only $750 a month to invest, you’ll have to bank on an unusually high rate of return of 14%.
But if you have a bit more money available — about $3,000 each month — you’ll need a 4% annual rate of return.
Alden made the matrix inflation-adjusted, using an assumption of 2.5% annual currency inflation over the period.
In any event, Alden shows a clear picture of how to get to $1 million.
“Wealth means different things to different people, and for a lot of people, it can seem bewildering or out of reach. But you can use a framework like the one described here to map out what your target wealth level is, and how to get there. When you break a big process like wealth accumulation into smaller variables, you can start to see realistic paths forward,” said Alden, cited by Time.