Believe it or not, becoming a millionaire is a goal that can be achieved if you follow the simple math behind it. The process for anyone to become a millionaire has been consistent over the years. If you follow the valuable pieces of advice, I can guarantee that eventually, you will become a millionaire.

## I Want To Be A Millionaire, But…

According to this article from

Student Loan Hero, “Americans owe over“$1.48 trillionin student loan debt, spread out among about44 million borrowers. That’s about$620 billionmore than the totalU.S. credit card debt.

The average loan amount for a student graduating from college in 2018 is **$39,400**. On the higher end, a medical school graduate could have as much as **$161,000** in student loans. Given the enormity of student loan crisis in the US, many students graduating from college think these student loans are here to stay with them forever. Some even resort to staying in debt for over 10 years with the hope that they will become eligible for federal student loan forgiveness program. I highly recommend you not take that route.

You don’t have to lose hope. Student loans don’t have to determine whether or not you can build wealth. Contrary to the popular belief, the math behind becoming a millionaire is shockingly simple.

## Becoming Debt Free In 2 Years After Graduation

According to this article from the Ladders, average starting salary of graduates in 2018 of **$50,000**. Assuming you are single and filing you tax returns for 2018, you would fall into the 22% tax bracket. Assume for our calculations that there is no state tax.

**Income** = $50,000**Federal Tax** ~= $6,900**Take Home Pay** ~= 43,000/year or $3580/month

Let’s take a hypothetical example of how a

23 year old studentwith$40,000in student loans borrowed at6%interest and$50,000annual salary.

I ran some numbers on this student loan pay off calculator at Student Loan Hero and it appears that in about 2 years you can pay off all your debt if you made a monthly payment of **$1750.**

You can become debt free in **2 years** if you can live on **50%** of your take-home pay and use the remaining amount to pay off student loans. This is totally doable folks! You can become debt free by 25 if you lean on your student loans really hard. If you lean harder, you can even avoid paying that additional **$2,758** in interest towards your student loans.

**Note**: You can adjust the numbers to suit your specific situation if you happen to have higher starting salary or have borrowed a higher loan amount. Use the calculator shared in the link above to get your exact monthly pay off amount.

## Shockingly Simple Math Behind A Million Dollar Net Worth

Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it. –Albert Einstein

There has never been a better time in the history than now, to become a millionaire, in the United States. Any goal might seem hard to achieve, in the beginning. Let’s break down this seemingly mammoth task to see how we can leverage time and compound interest to do the trick. I will demonstrate below a very simple process which you can adopt to crack the millionaire code.

If you started investing in a simple Roth IRA and invested

$200per month in a simpleS&P 500 Index Fundand did no other investments, you could accumulate$1,006,083.23by age 65. My calculation is based on a9.8%(not inflation adjusted) annualized rate of return fromS&P 500 indexfor the past90 years.Try playing with different numbers using this calculator to know how soon you can reach this number or your dream number.

You can already see how powerful compounding is. Your actual contribution out of **$1,006,083.23** is a mere **$96,000.** The remaining **$910083.23** is purely from compounding.

Just to put things into perspective. If you started investing the same amount at

age 30, you will only accumulate –$621,264.15.Those 5 years just costed you $384,819.08.

If you are young, time is on your side. Make the most out of it. Start investing early and your older self will thank your younger self. Those army of dollar bills will do all the heavy lifting for you.

A detailed table providing return on your investment for 40 years at 9.8% interest compounded annually.

Years | Future Value (9.80%) | Total Contributions |
---|---|---|

Year 0 | $0.00 | $0.00 |

Year 1 | $2,400.00 | $2,400.00 |

Year 2 | $5,035.20 | $4,800.00 |

Year 3 | $7,928.65 | $7,200.00 |

Year 4 | $11,105.66 | $9,600.00 |

Year 5 | $14,594.01 | $12,000.00 |

Year 6 | $18,424.22 | $14,400.00 |

Year 7 | $22,629.80 | $16,800.00 |

Year 8 | $27,247.52 | $19,200.00 |

Year 9 | $32,317.78 | $21,600.00 |

Year 10 | $37,884.92 | $24,000.00 |

Year 11 | $43,997.64 | $26,400.00 |

Year 12 | $50,709.41 | $28,800.00 |

Year 13 | $58,078.93 | $31,200.00 |

Year 14 | $66,170.67 | $33,600.00 |

Year 15 | $75,055.39 | $36,000.00 |

Year 16 | $84,810.82 | $38,400.00 |

Year 17 | $95,522.28 | $40,800.00 |

Year 18 | $107,283.46 | $43,200.00 |

Year 19 | $120,197.24 | $45,600.00 |

Year 20 | $134,376.57 | $48,000.00 |

Year 21 | $149,945.48 | $50,400.00 |

Year 22 | $167,040.13 | $52,800.00 |

Year 23 | $185,810.07 | $55,200.00 |

Year 24 | $206,419.45 | $57,600.00 |

Year 25 | $229,048.56 | $60,000.00 |

Year 26 | $253,895.32 | $62,400.00 |

Year 27 | $281,177.06 | $64,800.00 |

Year 28 | $311,132.41 | $67,200.00 |

Year 29 | $344,023.39 | $69,600.00 |

Year 30 | $380,137.68 | $72,000.00 |

Year 31 | $419,791.17 | $74,400.00 |

Year 32 | $463,330.71 | $76,800.00 |

Year 33 | $511,137.12 | $79,200.00 |

Year 34 | $563,628.55 | $81,600.00 |

Year 35 | $621,264.15 | $84,000.00 |

Year 36 | $684,548.04 | $86,400.00 |

Year 37 | $754,033.75 | $88,800.00 |

Year 38 | $830,329.05 | $91,200.00 |

Year 39 | $914,101.30 | $93,600.00 |

Year 40 | $1,006,083.23 | $96,000.00 |

**Assumptions**

- Annualized rate of return of 9.8% when invested in an S&P 500 Index fund. You can adjust this number to be more conservative and see how much more you need to save per month.
- You land a job which pays you the average salary listed in the example.
- Your loan amount is proportional to the amount listed above when you extrapolate the data to your specific situation.
- A million dollars in 65 years from now doesn’t have the same purchasing power as it has today. The article tries to demonstrate the simple math behind the process of becoming a millionaire. So you need to adjust your numbers to suit your goals.

I am aware that an average investor will do more than just stick with a $200 invest per month and possibly have more going in towards their future savings. So this article focuses on doing the bare minimum.

If you follow the simple math behind how to become a millionaire, I am sure you too can build a million dollar net worth. So what do you think?