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How to Become a Millionaire One Month at a Time: A Tool for Seeing the Effect of Compound Interest on Fixed Monthly Savings

People like Brian Tracy often point out that almost everyone in wealthy countries such as Canada or the United States of America can become millionaires over the course of their working lifetimes. If you simply save $100 per month and invest this money in an investment that gives a yearly rate of return of 10% (compounded monthly) for 45 years (i.e., from age 20 years to the typical North American retirement age of 65), you will retire with over a million dollars in savings/investments. I’ve created a tool to help you see the effect of compound interest on a fixed monthly savings rate.

Anyone who is working a minimum wage job and is not living beyond their means can save $100 per month — in this sense, becoming a millionaire is easy. If I had truly understood this earlier, I would have been saving at least $100.00 a month from when I was a young child.

If like me, you are starting late in your quest to become financially independent, you have to adjust your savings & investment rate to become a millionaire quicker. Right now (2009), consistently getting a 10% yearly return on your investments may be a little too optimistic. I think it’s fare to say that you can manage to get a 5% average yearly return across all your investments. The tool can help you plan on how to become a millionaire by allowing you to determine which yearly interest rate (compounded monthly), what fixed monthly savings rate, and what time frame (in years) is required.

Some of the features of the compound interest calculator includes the total final amount, the total without interest, total interest, and a table giving a month by month total showing how your money is growing. Additional features may be added to this finance tool as time goes on.

Advanced Uses of the Tool for Web-content Creators

The way I’ve designed the tool allows for URL-based input of parameters. If, for example, you blog about personal finance topics, you can use this feature to help illustrate the effect of different yearly interest rates (compounded monthly) on fixed monthly savings rates.

The tool currently has 3 parameters:

  • annualInterest=(integer_value)
  • monthlyContribution=(integer_value)
  • numberOfYears=(integer_value)

So to show your readers how they can become a millionaire over their working lifetimes by saving and investing $100 per month at a 10 percent yearly interest rate (compounded monthly), you would construct the following URL (which you can then use as a hyperlink):

http://www.marcusebarnes.com/tools/finance/interest.php?annualInterest=10&monthlyContribution=100&numberOfYears=45

As another example, if you wanted to point out the effect of a 5% yearly rate of return (compounded monthly) on a fixed savings rate of $1000 per month for 10 years, you would construct the following URL:

http://www.marcusebarnes.com/tools/finance/interest.php?annualInterest=5&monthlyContribution=1000&numberOfYears=20

If you use the tool on your website in any way, please share in the comments section of this post — free backlinks! :) (Please note that all comments are moderated.)

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