Suppose you and your spouse each start with a \$2,500/mth income. Without bonuses, huge increments, investments or lottery windfall, is it possible for both of you to save up \$1 million?

You bet.

By our calculations, if you get a yearly increment of 4% and a bank interest of 1%, your savings balance will hit \$1 million in 18 years.

We even factor in a yearly flat increase of 1% in your expenses. In the first year, you spend \$1,500/mth. Year after year, as you have more financial responsibilities, your expenses are projected to go up to \$4,870/mth in the 18th year. Pretty decent.

But are our assumptions valid?

Assumption 1: Starting pay of \$2,500. Most working professionals start off at around this amount. Check.

Assumption 2: Yearly salary increment of 4%. Most companies give a minimum increment matching the inflation rate to even the worst performing employees. And if you job hop, it’s almost standard practice to ask for a 10-20% jump in salary. Further, if you look at our projections in the spreadsheet, you aren’t expected to make more than \$5k before the 19th year. Many young professionals already make more than that amount a few years into their career. Check.

Assumption 3: Bank interest of 1%. No one is asking you to put all your money into those lousy saving accounts that pay 0.1%. There are fixed deposit accounts that pay more than 1%. Moreover, if you are a little savvy and not too risk-averse, you can earn more with blue chip stock investments. Check.

Assumption 4: Expenses that range from 30% to 49% of income. Just ask around. There are many people who lead very decent lives by spending only around 30% of their income. For guys, did you ever wonder how you got by on that meagre NS allowance? For older couples, did you ever wonder how you survived when you were earning much less? Check.

Of course, you may adjust the 3 variables mentioned above and use your own starting salaries in the calculations. Who knows, you may get to the million dollar mark sooner than 18 years. Download the spreadsheet (right-click and select “Save”) and start doing your projections!

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