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Road to P1 million: How long does it take to be a millionaire?

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Aneth Ng-Lim

<div class="embed-wrap"><figure data-feedback="fb:likes,fb:comments"><img src="http://sa.kapamilya.com/absnews/abscbnnews/media/2018/news/12/10/20181210_money1.jpg"/><figcaption>P1,000 and P500 peso bills are counted at a money exchange counter in Manila. <em>Jay Directo, AFP/File</em></figcaption></figure></div><p>Who wants to be a millionaire? I’m guessing most would answer yes, judging by the worldwide appeal of a TV show named after this same question, and asks it of contestants everywhere.</p><p>Even with inflation and the reduced value of P1 million today versus a year ago, or 5 years ago, P1 million is still a nice round figure to have in your bank account.</p><p>Financial experts say that earning your first million is the hardest. That’s because most people start with nothing, while it is easier to build more millions after the first.</p><p>Whatever your age, don’t think that being a millionaire is an impossible goal for you. With the right saving strategy, and a strong discipline to live below your means, you can join the 7 figure club.</p><div><strong>8TH WONDER OF THE WORLD</strong></div><p>Beyond saving and living frugally, there is one more secret to seeing your money grow and work harder for you. No less than Albert Einstein called compound interest the 8th wonder of the world, and explained that “he who understands it, earns it…he who doesn’t, pays it.”</p><p>Compound interest is simply interest on interest, meaning the addition of interest to the principal amount you saved. By not touching the principal sum, and reinvesting the interest you earned, you will see your money steadily grow over time. Many can attest that compound interest can create millionaires of anyone, from average income earners, to young and old, to men and women, and that includes you.</p><div><strong>HOW LONG DOES IT TAKE TO SAVE A MILLION PESOS</strong></div><p>Five years ago, The Economist published a chart that showed how long it would take breadwinners of average income households from 20 different countries to become a millionaire. The report showed the United States created the fastest millionaires in about 20 years, while people in bottom-ranked Romania will need around 350 years!</p><p>Unfortunately, the Philippines was not included in the story. We can look at a couple of Asia-Pacific countries who were though, and note that in Australia, Japan and South Korea, it will take 50 years or less to make their millionaire dream come true.</p><p>So why don’t we make our own guess-timate here in the Philippines. If we assume the Filipino breadwinner makes P250,000 a year or about P20,000 a month (and by TRAIN law does not need to pay taxes) and can afford to save P1,000 a month starting January 2019, earning an interest rate of 5 percent, she or he will wait 33 years to become a millionaire. That’s more than 3 decades of diligently saving P1,000 and never missing a single month of contribution.</p><p>While banks offer different time deposit rates nearly daily, we based the 5% interest return on the published rates from the website of Bangko Sentral ng Pilipinas (www.bsp.gov.ph). Look at the right side of the home page for the rate table that changes daily.</p><div class="embed-wrap"><figure data-feedback="fb:likes,fb:comments"><img src="http://sa.kapamilya.com/absnews/abscbnnews/media/2018/news/12/10/20181210_money2.jpg"/></figure></div><div><strong>WHAT IF YOU SAVED P2,000 MONTHLY?</strong></div><p>Thirty-three years is a long time, and depending on how old you are now, that may be past your retirement age. If you can double your savings commitment to P2,000 monthly, you can shave 10 years and earn P1.036 million in 23 years.</p><div><strong>WHAT IF YOU SAVED P3,000 MONTHLY?</strong></div><p>If you can triple your savings to P3,000 each month, you only need to wait 18 years to become a millionaire. And if you continue saving P3,000 for 27 years, you will have P2 million in the bank.</p><div><strong>WHAT IF YOU SAVED p4,000 MONTHLY?</strong></div><p>With P4,000 saved every month, you can hit the million mark after 15 years. In 23 years, if you keep saving, you will reach P2 million. Another 5 years of saving and your wealth will reach P3 million.</p><div><strong>WHAT IF YOU SAVED P5,000 MONTHLY?</strong></div><p>When you save P5,000 every month, in 12 years, you will have nearly P1 million. Continue saving for another 8 years and that will be P2 million. Push for 5 more years and you will hit P3 million. Add 4 more years and that’s P4 million. Or go all the way to 33 years to enjoy owning P5 million.</p><p>You can see that the first million takes time but after that hurdle, you will need less and less time to hit the second million mark, then the third, fourth and fifth. Maybe we will be blessed with better interest rates and that can help you reach your millionaire goal faster. The 5 percent interest is a conservative estimate, based on published time deposit rates offered by commercial banks.</p><p>No matter how long it takes, what’s important is to start today. If you just received your 13th month pay or year-end bonus, don’t blow it all away for holiday spending. Set aside money for your future – it’s never too late, and never too early too.</p>

<p>Who wants to be a millionaire? I’m guessing most would answer yes, judging by the worldwide appeal of a TV show named after this same question, and asks it of contestants everywhere.</p>

Who wants to be a millionaire? I’m guessing most would answer yes, judging by the worldwide appeal of a TV show named after this same question, and asks it of contestants everywhere.