On the face of things, becoming a millionaire seems to be a case of just accumulating money. In a world dominated by money, it’s always nice to dream about grasping true financial freedom – can any of us become millionaires, then, in our lifetimes?
Maths alone might tell you that saving as much cash as possible is a sure fire way to become a millionaire. Therefore, I thought I’d take a quick look at a question that plenty of people still seem to be asking. How do I become a millionaire? Is investing a better route towards building a fortune? What exactly does anyone mean by ‘millionaire’ these days, anyway? Let’s dive in and take a look.
If you want to jump straight to the answer and find out how long it will take you to become a millionaire, do check out the calculator below!
Millionaire Calculator – UK
If you want to find out how much you need to save and invest to become a millionaire in the UK, try playing around with the calculator below.
There are 3 inputs to this millionaire calculator:
- Starting Portfolio Value: Enter the current value of your portfolio. If you are just starting out, you can use £0.
- Monthly Investment: How much money you plan to invest in to your portfolio each month. You can try any value – say £500 per month.
- Annual Rate of Return: The total return on your portfolio on an annualized basis. If you are fully invested in stocks, you can try 8-10%. If you are a conservative investor, you can try between 5-7%.
The calculator generates an output and tells you how many years it will take for your portfolio to reach one million pounds There is also a handy little chart that shows your portfolio growth over time. Feel free to use the controls at the top right of the chart to pan and zoom, or to save an image of the chart.
How Much Do I Need to Save to Become a Millionaire?
For your specific situation I do recommend using the calculator above to determine how quickly you can become a millionaire. However, if you want some simple ideas, let’s take a look at the two tables below. Both tables essentially show the same information – how many years it will take you to become a millionaire if you are starting from £0 in current savings. Sadly it is not possible under normal circumstances to become a millionaire overnight!
The first table shows the daily savings rate required if you want to become a millionaire. So for example, if you wanted to become a millionaire in 20 years from now, and expect to achieve an 8% rate of return on your invested portfolio over that period, you will have to save and invest £60 for each day of the year!
The second shows the monthly savings required. Continuing with the same example as above, you would need to invest £1,821 each month and invest it regularly. You can test these values out in the calculator as well.
As you can see, how much you need to save depends on two key factors: time (or your age) and your rate of return. Compound interest builds up the more times you compound – if that makes sense. You can see in the output generated by the calculator above. At first it might look like the chart does nothing for a long time and then in the last few years it really curves upwards! That’s the power of compounding.
Start early and start with as big an amount as you can comfortably commit!
What is the definition of a millionaire in the UK?
A millionaire is an individual with a net worth of at least £1 million. The definition is typically specific to the region, so a millionaire in France would be someone with a net worth of at least one million euros. While being a millionaire is still considered as a badge of honour, it does not have the same exclusivity as it once did. However to maintain proper comparability across countries, often one common standard is used – a US dollar millionaire. A US dollar millionaire is someone who has a net worth of equivalent to at least $1 million.
To calculate an individual’s net worth, all of their assets are totaled and all of their liabilities are subtracted. This figure includes cash and investments, but it also typically takes into account the value of property and other possessions. While the definition of a millionaire has remained unchanged for centuries, the number of millionaires has gradually increased over time. This is due in part to inflation and the rising value of assets such as property, but it is also a result of increasing income levels and accumulated wealth.
Today, there are millions of millionaires around the world, and their ranks are only expected to grow in the years to come. Although the definition of a millionaire may have changed over the years, one thing remains constant: being a millionaire is still an impressive feat.
What percentage of the United Kingdom are millionaires?
According to a study by Credit Suisse, the are 2.5 million dollar millionaires in the UK. As the UK’s total population is 67.2 million, this means that 3.7% of the population is a millionaire, when measured in US Dollars.
However given the pound’s decline against global currencies and the US Dollar in late-2022, it’s likely that those where just on the edge of that list, have now probably moved out of the millionaire list.
Over time, the number of millionaires across the world has increased steadily as rising asset prices and inflation make it much easier to break in to the club! Here’s a table which shows the top 5 countries by number of millionaires.
| Country | Number of Dollar Millionaires | Percentage of the Population |
|---|---|---|
| USA | 22 million | 6.7% |
| China | 5.3 million | 0.3% |
| Japan | 3.7 million | 2.9% |
| Germany | 3 million | 3.6% |
How Much is Considered Rich?
So – how much is rich in this day and age? A million probably doesn’t travel as far as you think it might. It all depends on how you spend your money. It’s very easy to burn through a million based on the current cost of living.
Various studies disagree on how rich ‘rich’ actually is. It seems a good ballpark figure is somewhere around £2.5 million, well in to the millionaire club. This means that you’ll have enough money to make passive income through investments and still make a return. It also means you’re not going to lose all your wealth through taxes or monthly expenses. Therefore, you’re only as rich as you feel you are. That’s more than a bit corny, but it’s true.
Staying rich is also not easy! Simply piling your cash into a savings account will not help you cover your living expenses – even if you have £1 million!
Simple Steps to Grow Wealth and Become a Millionaire
So – with this in mind – how on earth can you expect to become a millionaire? Saving is a good start, but it’s not the be-all and end-all. You’re going to need to look at the bigger picture. What are some of the key areas in your life in which you can drive extra revenue and income? Where could you save money? What’s likely to pay off for you in the long run? Where can you invest to make your wealth compound over time?
Let’s take a quick look at a few simple steps to building wealth.
Focus on the Big Things
By the ‘big things’, I mean the big purchases. Focus on areas of your life where you could drive more income with minimal effort. Could you save money on bills? Will it make sense for you to invest money in property? Could you actively ask your manager for a raise? There are risks involved when you look at the bigger picture, but as Sethi says, it’s only you that has any kind of control over how you’re growing it.
This means you should be ready to seize opportunities with both hands. Cutting back is not going to do enough to build your fortune in the long run. It’s a good start, but you need to work to a major plan of action. Is your bank supporting you enough? Are there opportunities for you to spend money now, and reap rewards later?
Create a Monthly Budget
Creating a monthly budget is a great start. This will let you see where your money is going. It’ll also help you understand your habits. Here, you’ll be able to identify if you have any free money for saving or investing. You’re going to need to work out your absolute base amount for living. Give yourself a cushion, and make sure to drive for more income if you really don’t have any kind of wiggle room.
Consider an Automatic Savings App
Technology when used wisely can be a wonderful thing! The best apps to help savers not incorporate a healthy dose of advanced technology to help you maximize your savings!
Chip and Plum are two such apps. Both Plum and Chip work through AI algorithms, meaning that they apply complex equations to work out exactly how much to save based on your income and outgoings, as well as your extended goals. To get the ball rolling, you’ll need to fill in a few details, and to let either app know what you’d like to save for, and how much you spend on a regular basis.
You can tweak and maintain the sensitivity of either app by choosing from one of several ‘levels’ of saving. With Chip, you can up the saving sensitivity from levels one to five. Plum, meanwhile, as mentioned, has ‘shy’ to ‘beast’ levels.
You can then take these savings and either deposit them in a savings account or invest it to really compound your savings and grow it over time! If you’re curious to learn more, take a look at my detailed dive in to Chip and Plum to learn more about how automated savings work and how it can help you!
Start Investing as Early as Possible
Investing, of course, is how many, many people become millionaires and billionaires. If you start early – say in your 20s – the force of compounding works in your favour. Starting saving and investing early is the golden rule of finance and personal wealth management.
Sometimes, it’s easier said than done. However, before you have too many commitments which you need to pay out for each month, it’s wise to invest what little cash you have in savings or stocks.
If investing is completely alien to you then read the as many of the best investing books for beginners that you can. Therefore, you will at least have a good stock of money available should you need to pay for anything particularly major as and when the time comes.
If you find the world of investing too overwhelming, luckily there are many investment platforms that take away all the hard work. Some examples of these platforms include Moneyfarm, Nutmeg, Chip, and Hargreaves Lansdown. I have reviewed all of these platforms (and many more) so be sure to check out my articles on them. All you have to do is just tell them what your goals are, ensure you follow up with your regular contributions, and let time and compounding do the hardwork for you!
Becoming a wealthy investor will take a lot of time and work. However, if you start low, you’ll be able to start analysing risk from the lowest, most base level – as Sethi, again, states, getting started is the most important part – invest something, anything, even if it’s pocket change. This is worth the risk, on balance.
If the topic of investing interests you, then you’re in luck – PFF is dedicated to readers just like yourself. In addition to the book above, you can read at my articles covering the best investment platforms and best investment apps in the UK.
Start a Side Hustle
You should, of course, consider supplementing your income. If you’re really unlike to eke a raise out of your boss any time soon, look at side jobs and projects you could do to drive money into your monthly budget. Do you have a talent that’s going to waste? Are there items or products out there you could invest in and sell on at a profit?
Think carefully about what you are going to need to do to supplement your income to the level you need. I’ve taken a recent look at ways to drive up your income through side jobs and projects. If you’re lucky, your side hustle could grow in to a successful business that brings in bucket loads of cash! Why not give it a try?
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Can You Become Rich Just By Saving Money?
Let’s cut to the short answer – no. The fact is, there is more to growth of wealth than just putting money aside for a rainy day. Yes – it’s certainly something you should be doing, but with fortune-building as your focus, you’re going to need to tackle things from a different angle.
You need to first save the money, but more importantly, you need to invest that money to make it grow. Simply putting the money in a savings account will not help you get rich. Although savings accounts now pay a reasonable amount of interest, in the 4-5% range, you are still losing your purchasing after inflation as inflation still outpaces the interest rates.
Let’s say however that you are risk averse and wanted to deposit your money in savings account only. If you saved £10 a day – a big chunk of money for some people – how long would it take you to become a millionaire? Around 64 years. Even if you saved £100 per day – even more of a squeeze – it’d take you around 19 years of your life to reach millionaire status. Investing, however, is much more likely to get you to your target a lot quicker.
Ramit Sethi, author of I Will Teach You To Be Rich, extols the virtues of investing. Sethi’s general viewpoint is that you should be taking control of everything that happens to your money. Even if you only invest £1 per day, it’s worth it. It’s worth taking investment risks if it means there’s a chance to see growth. If you’re just going to throw your money into a savings account, you’re not going to get any extra money on top bar a measly portion of interest.
What is the fastest way to become a millionaire?
The fastest way to become a millionaire is to win the lottery! Sadly, it’s also the least likely way to become one as your odds of winning the lottery are extremely low. Unfortunately, there are no short cuts to growing your wealth. Yes, some people do get lucky from time to time, however depending on luck is not a plan!
Some options however include the following:
- Start and grow a successful business: If you can grow a business quickly and can generate an EBITDA (or cash flow) from it of around £300,000 each year, you can sell that for 3 to 4x multiple to a buyer, which would give the business a valuation of anywhere from £900k to £1.2M.
- Invest your money: Whether you invest your money in the stock market or in real estate, investing in a proper manner gives you the best chance to grow your wealth over time. However it’s important to invest properly, otherwise you can easily lose your money.
- Get a high paying job or side hustle: The most guaranteed way to become rich over time is to have a high-paying job, but at the same time keeping your expenses low. The savings can then be invested to compound and grow over time!
FAQs
Is it hard to become a millionaire in the UK?
Yes, it is hard to become a millionaire. The good news though is that it’s not impossible. There are 2.5 million millionaires in the UK, so although it’s only 3.7% of the population, it’s still a big number! You too can become a millionaire if you are financially savvy and ensure that you appropriately invest your savings to grow over time.
How can I become a millionaire in 5 years?
If you want to become a millionaire in 5 years, and assuming you have £0 savings now, you will have to save and invest £13,000 per month (equivalent to £156,000 per year) and generate an 8% compounded return on it. It’s not an easy task!
How to save £1 million in 15 years?
To save 1 million pounds in 15 years, you will have to save and invest £3,069 per month (£101 per day) and earn 8% compounded return on the portfolio over time. You can try out the millionaire calculator to try out some different combinations that would suit your situation.
How much would I have to save to be a millionaire in 20 years?
To save 1 million pounds in 20 years, you will have to save and invest £1,821 per month (£60 per day) and earn 8% compounded return on the portfolio over time. You can try out the millionaire calculator to try out some different combinations that would suit your situation.
How can I get rich in 10 years?
The definition of “rich” can vary from person to person. By rich, if you mean that you want to have a net worth of £1 million in 10 years, then you will have to save and invest £5,752 per month and earn an 8% return on it!
