leonardo-cheersWant to become a millionaire with a daily savings plan? No problem! Just determine when you’d like to amass that sum, then divide $1,000,000 by the number of years (but translated into days). With the touch of a couple keystones, you’ll find out how much your deposits need to be.

Here’s an example. You’d like to achieve your goal in twenty years. That would be 7,280 days. Now plug those numbers into basic calculator and you’ll soon see that deposits of $137.36 each day will total up to $1,000,000.

However, achieving that financial milestone is usually a touch more complicated than that. After all, there are usually many other factors at play, which is usually a good thing. You may not be starting at zero, and if so, you’d have to consider the total value of your current combined assets. It may include the equity in your home, and the worth of your car, jewelry, and other property. Then there’s cash you might have in the bank and investment accounts, or for some, hidden in a mattress. Don’t forget the money your deposits would earn over time if you invested it, since those earnings would reduce the amount you’d have to set aside.

While there are many such considerations at play, there is a way to keep it somewhat straightforward. I coordinated with Brett Graff, AKA The Home Economist, to develop a quick and dirty guide to amassing a million bucks. Here you go.

Know how far ahead or behind you are. The first step is to determine today’s net worth. Start adding and subtracting to see where you stand. This exercise is important because the final number will show you if you’ve got to make up for lost time or if you’re already ahead of the game.

Think hard. What is in your checking, savings, investment and retirement accounts? What about all f the things you own? Estimate what you can sell them for. Tally all of these assets.

Now consider all of your liabilities, which is what you owe on credit cards and loans. Total those up and subtract that figure from your assets. The final number will be your net worth. It will be positive if the value of all your assets is greater than all your liabilities, and negative if your liabilities exceed the value of your assets.

Let’s say you have a positive net worth of $140,000. In that case you’d have to accumulate $860,000 to hit your final goal. On the other hand, if you are in negative by that same figure you’d have to make up for the deficit and add it to the goal. The real amount you’d have to save would be $1,140,000. Ouch.

Maximize your money by making the most of your employer sponsored retirement plan. I want you to contribute as much as you can afford to your employer sponsored retirement plan, such as a 401(k) or 403(b). This way you can save money on your taxes and really come out ahead if your company matches funds. “Free money is good,” says Graff. “Very good. Tax free money is the same as free money.” Don’t turn away from either.

Work with your human resources department to determine how much you can have automatically deducted from your paychecks and what it will amount to by the date you want to hit your million dollar mark. Again, if it’s in 20 years, ask them to calculate what your contributions plus estimated gains would be at the end of that time frame. Keep that number in mind.

Add your net worth amount to the estimated value of your retirement plan in by your goal date. Maybe the total of these two is $450,000. That would put you nearly half way there, so you just need to save $550,000.
Pick up that calculator again. $550,000 needed in 7,280 days = $75.54 per day.

Of course most people don’t save on a daily basis but do it monthly instead. In this scenario, you would have to save about $2,267 every month. Still, breaking the amount you need to sock away by smallish daily savings deposits can keep you on track. Psychologically, it may not seem like a massive amount that the monthly sum is.

But wait, what about investment earnings on that savings? Yes, you can calculate a rate of return on a goal that is longer than a few years, but to be safe (and to keep it simple) I used flat figures. Whatever you do, be conservative with all numbers and projections. “It’s easy to add up the value of your retirement account plus your house, but it’s more difficult to predict the future.” says Graff. “So remember when seeing all those delicious zeros, you have to brace yourself for stock market drops and even real estate tumbles. Hopefully they won’t happen, but there’s a difference in being cautious and ignorant. Because nothing is worth anything until you sell it.”

Know if your goal is possible, then adjust it if it’s not. Construct a budget so you can determine how much money you have coming in and going out. Add up all of your regular expenses (mortgage or rent, utilities, groceries, insurance premiums, etc.) and periodic expenses (such as home and vehicle repairs, gifts, and travel). Subtract the combination of all your expenses from your net income to see how much you have left over for savings.

Soon you’ll understand if you can meet your goal. If you’re short, though, think about ways to increase your income, decrease your expenses, or both. It’s amazing what you can do when you really want something!

In the event that the numbers don’t work out even with extreme effort, don’t give up. Extend the length of time you can wait to become a millionaire. Never forget that this is your life — and you’re in control of how you earn, spend, invest, and save.

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