We all want to save a little more money sometimes if we can help it! But how much money should you really be putting aside from your monthly paychecks? Is saving $1,000 a month good, for example?
Yes, saving $1,000 a month is great! It amounts to $12,000 a year and if this amount is invested properly, it will grow into a very large portfolio over time.
Of course, there are a few other elements worth considering when saving $1,000 a month. I’ll take you through what you need to know below.
How Quickly Will $1,000 a Month Grow?
As I mentioned above, saving $1k a month – equivalent to $12,000 a year – can grow to a big portfolio very quickly. If you’re interested in checking how much that adds up to over time, try out the portfolio calculator below.
If you want something a bit more sophisticated and want to see when you can become financially free, check out the COAST FIRE calculator.
Portfolio Growth Calculator
There are 4 inputs to this saving $1,000 a month calculator:
- Starting Investment: Enter the current value of your portfolio. If you’re just starting out, then you can default it to $0.
- Monthly Savings: The amount you will commit to your portfolio each month.
- Annual Rate of Return: A safe value to use is somewhere between 6% to 8%. If you are extremely conservative, then you can use 4% to 5%. If you are aggressive, you can try between 8-10%.
- Number of Years: How many years you can contribute the $1k per month.
The calculator shows two charts in the result. The first chart shows your portfolio growth over time when you save $1000 (or another amount) a month.
The second shows the same thing, but splits out the components in to your cumulative invested capital (dark blue) and market returns (orange). If you invest for long enough (over 20-30 years), the market returns will far exceed the total cash you have contributed.
Working on your results…this might take a few seconds…Thanks for waiting!
How long will it take me to save $1 million when saving $1k a month?
If you invest $1,000 per month in the financial markets, your portfolio can grow to $1 million in just over 26 years if you earn an average 8% per year. If your portfolio generates 6% per year, you can expect to get there in 31 years.
Of course if you pile it all in to bank CDs, you can probably get there in 36 years or more.
What’s the best way to invest $1,000 per month?
The best way to build up a huge portfolio with a $1,000 a month in savings is arguably through investing. However before we get there, it’s first important to look at the full picture.
- Eliminate debt: As boring and repetitive as it sounds, it makes sense to first eliminate your debt – especially high interest rate debt such as credit card debt or other consumer loans like car loans or those buy-now-pay-later type debt.
- Build Up Your Emergency Fund: Again, another piece of unsexy advice, but it’s important to build up your emergency fund with cash savings that has at least 3 months, but preferably 6 months of expenses. You can invest your emergency fund in a high interest savings account or perhaps even put it in a money market fund.
- Invest it: Finally we get to the most fun piece. It’s important to invest your money in a way that aligns with your needs and risk tolerances. Depending on your needs you may choose to go with balanced funds or perhaps go all out with 100% equity funds. It’s important to manage your portfolio prudently, but being overly conservative is not recommended as you will end up sacrificing long-term returns.
If you need help with this, a good way to start would be to educate yourself and to meet with a financial advisor who has fiduciary duty towards you. They will help you decide how to structure your portfolio. Some people have a preference for capital growth whereas others may want dividend income.
If you’re going digital, make sure to choose a trading platform, like M1 Finance that investors and traders recommend.
Can I afford to save $1,000 a month?
That all depends on where you live and your outgoing expenses. If you live in somewhere like Mississippi, where the average wage is over $40,000, that’s more than half of your annual salary.
However, in Washington state, where the average salary is more than $88,000, you’re saving a little over a quarter of your yearly income, which seems a little more manageable.
There are all kinds of models and calculations out there that financial gurus recommend to help you work out what you can and can’t save based on your income and expenses. Ultimately you have to figure out whether this level of savings works for you. It’s a deeply personal decision and one where you have to judge whether the savings rate leaves enough money for you to live your life in a reasonable manner.
How can I save $1,000 per month?
To save $1,000 a month, you must carefully work out your monthly expenses and income. Ultimately, the quickest way to start saving this money regularly is to increase your income and lower your expenses. It’s basic math! That means it may be worth thinking ruthlessly about your costs and cutting out anything you really don’t need.
Try and stick to your savings goals as much as you can. In an age where living costs are increasing, it’s not easy to keep putting money aside. This is likely to be the case if you have bill after bill to pay for!
Speaking of debt, it’s always wise to pay off debt before you start saving. Otherwise, you’ll end up paying out to creditors anyway. That – and this is much more important – you’ll help your credit file.
Before putting $1k a month aside, look at any debt you have left to clear. Can you slowly whittle this down? Doing so will remove the risk of legal action against you and will help you to build up positive credit should you need it in future.
Why should I save $1,000 per month?
Beyond the obvious, having an emergency savings fund is a good idea. Unfortunately, life has a habit of being fairly random in nature, meaning if you need medical care or to take time off work suddenly, it’s worth having a savings pot to fall back on.
You should also start saving for taking time away from work, too. What if you want to take your family on vacation? Having a few thousand dollars in a savings account can ensure you’ll get away somewhere without having to keep counting the pennies.
Do also remember that costs are rising all over the world. Inflation is increasing in many territories, which is why it’s a good idea to have a stock of money to one side so you can overcome spending challenges.
Above all, it’s comforting to know that you have a savings account and money spare to handle much of what life throws at you. Sadly, many of modern life’s challenges need money before you can even start thinking about solving them!
Before You Go…
The best way to increase your savings is to first increase your income. Whether it’s a side hustle or something that involves a little less work. Want to start making more money to save? Take a look at my guide on the best things to buy and sell for profit.
Our whole blog is dedicated to help you get on the path of financial freedom. Feel free to browse around and read through the articles.
If I save $1,000 a month for 10 years, how much will I have?
You will have anywhere between $158,000 to $174,000 if you invest the money and earn an average of 6-8% per year. Without investing, you will have only $120,000. To learn more, try out the calculator on this page.
How much will investing 1000 per month for 5 years lead to?
You will have anywhere between $67,000 to $74,000 if you invest the money and earn an average of 6-8% per year. Without investing, you will have only $60,000. To learn more, try out the calculator on this page.