The First Million is the Hardest

It's true that it's easier for the rich to get richer. That first million is by far the toughest to make. But once you're there, it gets much easier to make the next million.

When you already have money working for you, each percent of return adds more to your worth. Earning 10% on $10,000 gives you $1,000. Making 10% on $1,000,000 gives you $100,000. 

Let’s look at what it takes to accumulate your first million. Assume you regularly invest a monthly amount at a given return. Using the power of compounding, the table below shows you how many years it will take you to reach your first million. We'll assume you're starting from zero. Already have some savings? Then see our Million Dollar Savings Calculator to calculate exactly how long it will take to become a millionaire in your specific situation.

You might wonder why I chose $1,375 as the last monthly contribution. That number happens to be the maximum amount an individual can contribute to their 401k in 2010, divided by 12 months.

As we've already mentioned, after you reach your first million it takes less time to make your second. When you start from $1 million, you can take advantage of the effect of compounding on that first $1 million. 

If you consistently put away as much as you can afford, it is possible to have $2 million in 26 years if you contribute the maximum to your 401(k) and achieve a 10% return. Even better, some companies will match some of your contribution, helping you reach your million-dollar goal even faster.

The taxman even wants to help.  He'll give you a break when you save in tax deferred accounts like 401(k)s and IRAs. If you are in the 25% marginal tax bracket and you contribute $200, your out of pocket cost is only $150. Now you have a little more money to contribute to help you become a millionaire even sooner.

The most difficult part is getting started. Once you begin, it becomes easier. So, what are you waiting for? Sign up today to have that monthly allotment taken out of your paycheck. Then increase it ever so slightly every six months until you reach the maximum contribution level. Before you know it, you will be well along your way to your first million.

What's even better than earning rewards for spending on your credit cards? Getting paid hundreds of dollars worth in sign-up bonuses in three months or sooner -- just for trying out a new card.Wh...
by Christian Hudspeth Tired of dragging credit card debt around with you? Taking 15 minutes to transfer your debt to a credit card with generous balance transfer perks could save you thousands in...
If you're going to spend money anyway, then why not get paid for it?Whether you're looking for credit cards with up to 6% cash back, double flight miles, or even a free hotel stay each year, ther...
by Christian HudspethIn times where interest rates are on the rise, you may start hearing financial advisors and bankers sing the praises of an income strategy called "CD laddering" (short for ce...
Those of us familiar with selling property know real estate agents don't come cheap. With real estate agent commission and fees amounting to as much as 6% of the selling price (that's $18...
Beverly Harzog is a nationally recognized credit card expert, author, and consumer advocate. She blogs about credit cards at BeverlyHarzog.com. Being in credit card debt is the pits. I've bee...
If you haven't already felt the pressure to refinance your mortgage, you're probably really feeling it now. Mortgage rates are still hovering near historic lows. But with the economy improving...
If you or someone you know is thinking about getting a home mortgage, you may want to know about the thousands of dollars in hidden charges that some lenders are quietly adding to mortgage loans ...
by Christian Hudspeth Money market accounts (MMAs) and savings accounts make great places to set aside your emergency fund money and earn some interest income at the same time.Simply put, these s...
by Christian Hudspeth It's true that auto loans and home loans offer attractively-low annual percentage rates (APRs), while credit cards offer borrowing power without the risk of ever seeing the ...
by Christian HudspethWant to keep your emergency fund safe while earning interest yields that are three to five times higher than a typical savings account? Putting your money into an FDIC-insure...
Question: Hi there. I need your advice. I'm only 19 and I really need to start investing. Where can I start? -- Tirelo M., Gaborone, Botswana Answer: You've definitely got the right thinkin...