How do I save a million dollars in 10 years?

To save a million dollars in 10 years, first analyze your finances to see what’s possible with your current income, savings, and investment strategy. Then, create a financial plan that lays out the steps you need to take to get to $1 million, such as cutting expenses and adjusting your investment mix.

Saving $1 million in 10 years equates to saving $72,378 each year, assuming a 7% annual rate of return on your investments. Saving that amount of money in a year is not easy for most people, as the average person only saves about $2,300 each year. However, with proper planning, determination, and a solid savings strategy, saving $1 million is possible.

How to Save $1 Million in 10 Years

Assess Your Finances

Analyze your income, debts, and current savings (amounts you have in savings, retirement, and investment accounts) to determine how likely you are to reach $1 million in 10 years with your current income and savings rate. If it seems unlikely that you can reach $1 million within that time frame, you will need to do things like increase your savings rate and adjust your investment strategy to reach your goal. However, you should avoid overly risky investments, as they could really set you back if they go south.  

Create a Financial Plan

A financial plan is a document that lays out your goals and what you need to do to achieve them. After you have assessed your finances, you should create this type of financial roadmap to guide you to saving $1 million in 10 years. If you are unsure of the steps you should take, a financial advisor can analyze your finances and help you come up with a financial plan.

Boost Your Income

Your current income alone may not be enough to help you save $1 million in 10 years. If you’re able to increase your income, you’ll have more funds available to invest, allowing you to grow your money faster. To boost your earnings, you could ask your current employer for a raise, work overtime, get a side hustle, or find a job with higher pay.

You can also try to earn passive income by doing something like renting out a property that you own or investing in the stock market. Households that earn passive income typically bring in around $4,200 per year on top of their standard paychecks, according to data from the U.S. Census Bureau.

Avoid Lifestyle Creep

Lifestyle creep is when you increase your spending as your income increases. This typically happens after you get a raise or bonus or you find a new job with higher pay. Falling into this trap can make it harder to save and reach your $1 million goal within 10 years. To avoid lifestyle creep, you should keep your spending in check by making a budget and tracking your expenses. You should also increase how much you save every time your income goes up.

Analyze Your Investment Strategy

You should review your current investment strategy or build one if you don’t have one already. You should typically expect an average rate of return of 6% to 7% per year after adjusting for inflation. If your current earnings from your investments will not be enough to get you to $1 million in 10 years, you may want to switch up your investment strategy by getting investments that carry more risk but offer greater returns, for example.

Build a Diversified Portfolio

A diversified portfolio of various types of stocks, bonds, assets, and index funds can help you grow your money but also limit risk. For instance, if you put all your money into a single company or industry, you risk losing money if that company or industry underperforms. Spreading out your money among different types of investments and assets can reduce that risk and provide more stable returns.

Reinvest Your Dividends and Interest 

It’s going to be difficult to reach your goal of saving a million dollars in 10 years if you keep pulling out your dividends and interest. In order to reach your goal, it’s important to take advantage of compounding and keep reinvesting your earnings to grow your money faster. In fact, 85% of the cumulative total return of the S&P 500 since 1960 is due to reinvested dividends and compounding, according to Hartford Funds. Many investment accounts allow you to automatically reinvest the dividends you earn, so you don’t have to do it manually each time.

Increase Your Saving Rate 

The more you can save per month, the quicker you can get to $1 million. You can increase the amount of money you put into savings or increase your contributions to your investments to make it more likely that you will reach your goal.

Reduce Your Spending 

Identify areas where you can reduce spending to free up money that you can contribute to your savings account or investments. You can do things like cancel streaming services you no longer use, reduce how often you eat out at restaurants, and look for low-cost or free entertainment.

Save Windfalls 

Save windfalls, like bonuses, tax refunds, or inheritance money, to help you reach your $1 million goal within 10 years. With such a lofty goal, every dollar that you can save helps.

Where to Put Your Money Once You Save $1 Million

When you finally reach $1 million, consider putting the bulk of the money in low-risk accounts that allow you to continue earning interest on your savings. Deposit accounts are FDIC-insured only up to $250,000, so it’s a good idea to have multiple accounts to reduce any potential risk. Below are the best options.

Traditional savings accounts: A traditional savings account is FDIC-insured and earns more interest than a checking account, with interest rates averaging 0.30%. The average interest rate for a checking account is 0.07%. However, some banks have monthly limits on how often you can withdraw money from a savings account. Many banks limit your withdrawals to six per month, but some banks may have a higher limit.

High-yield savings accounts: Some of the best high-yield savings accounts have interest rates as high as 5% or 10% on certain balances, earning more interest than traditional savings or checking accounts. These types of accounts carry little risk and are FDIC-insured.

Certificates of deposit (CDs): A certificate of deposit is a type of savings account that is FDIC-insured and requires you to keep your money invested for a fixed period of time, typically ranging from a few months to several years. As your money sits in the account, it earns interest. However, if you withdraw the money before the agreed-upon time, you will have to pay a penalty.

Money market accounts: The best money market accounts can save you over $500 compared to the average offer, according to WalletHub’s analysis. They are also FDIC-insured and let you earn more interest than traditional savings and checking accounts. In addition, you may have the ability to write checks and use a debit card with money market accounts. However, these types of accounts may have minimum balance requirements and may limit monthly withdrawals and transfers.

Treasury bonds: Treasury bonds are not FDIC-insured, but they are fully backed by the U.S. government, so the government guarantees to pay you your interest and principal when the bond matures. This makes Treasury bonds a low-risk investment. You can hold Treasury bonds for up to 30 years and enjoy tax benefits since they're exempt from state income tax.

To learn more, check out WalletHub’s guides on how to set a financial goal and how to save money.