how-you-can-save-1-millionPlanning to save your first $1 million could go a long way toward securing your retirement lifestyle.

“It’s definitely a reasonable goal in today’s world,” says Paul Cordero, a Certified Financial Planner (CFP®) in California. “In fact, saving $1 million is just a starting point if you think about how long you may live.”

Saving $1 million for retirement may also be more practical than you think. It won’t happen overnight, but the good news is you don’t have to earn six figures to get there. Make a plan, watch your spending, and invest wisely to prepare for the future.

1. Formulate a game plan.

In order to save $1 million, you’ll need to do some basic math. Your yearly goal will differ depending on three factors:

  • your current age
  • the age you expect to retire
  • the return rate of your investments

For example, according to Bankrate’s online calculator, if you are 25, you should put away about $5,100 a year to reach $1 million by age 65 (with an expected return of 7 percent). That amount doubles if you are 35. The earlier you start, the more your money will be worth in the long run due to the power of compounding interest.

If you’re a beginner, however, you may want to start by setting aside a percentage of your income.

“Ten percent is a good number and easy for people to get their arms around,” Cordero says, “If you get in the habit of saving 10 percent, then you will get used to not having that money.”

2. Analyze your spending.

Calculating your goal is the easy part. The real test will come when you have to curb your spending to meet it. First, tally up your fixed costs such as your rent or mortgage, utilities, debts, and transportation costs. Compare your fixed costs with your variable costs, which are all the other types of expenses, including clothes, dining, and entertainment.

“People are surprised that what they need to live on can be dramatically different from their variable spending,” Cordero says.

After you have an accurate picture of your spending, dig a little deeper into your behavior, Cordero advises. What causes you to spend on clothing? Why do you feel you need a latte? Often, impulse purchases result from anxiety or temporary feelings of depression.

“Wait a day before you buy to see how you feel,” Cordero advises. You may find it helpful to track your spending with budgeting software such as Quicken, Mint, or You Need A Budget.

“I like to bring it back to the goal: What behavior is negating your achievement?” says Tim Hamilton, a CFP with Financial Families.

3. Pay yourself first.

Once you’ve established your goal, Hamilton suggests that you “pay yourself first” by transferring the goal amount out of your paycheck before you do any spending. These automatic deductions, or forced savings, can help you reach your goal if you are quick to spend your income. Because the funds are automatically transferred, you won’t account for them in your budget.

“If you commit to forced savings by automatic deduction, then the budgeting takes care of itself because you only have a certain amount left to use,” Hamilton says.

Saving money up front may also help you feel more comfortable about what you decide to spend. “If you follow the discipline of saving 10 percent, you don’t feel like you are being frugal, your money is being utilized for your goals, and you have the freedom to spend what is left,” Cordero says.

4. Identify what type of investor you are.

Your investing strategy can affect the amount you need to save. If you want a portfolio with less volatility, you may need to save more than if you are comfortable taking some risks with your investment. That’s because more conservative investments may have less of a return than those with a higher risk.

Hamilton advises that conservative investors look to treasury bonds because they are considered the safest investment. For those interested in a higher rate of return, Hamilton recommends stocks.

“You won’t find an asset class that more consistently delivers high returns over an extended period of time,” he says. Money market funds or an index portfolio may be a good way to get started in the stock market, Hamilton suggests.

Over the course of 20 years, fees may eat up a lot of your investments, so it’s wise to understand what your advisor charges and where you’ll be taxed.

5. Bolster your career.

You won’t make it to $1 million if you don’t have an income.

“Your biggest asset while you are working is your own sense of your ability to make money,” Cordero says. Developing your professional skills can only help your retirement savings if you get a raise or bonus.

Take advantage of your employment benefits, such as 401(k) accounts and employer match programs. Don’t forget to build your emergency fund, which should cover six months’ to a year’s worth of spending. If you lose your job or need to take some time off, the emergency fund will ensure that you don’t have to raid your retirement accounts.

The average American life expectancy is 78 years, according to the Centers for Disease Control and Prevention (CDC), so it’s important to ensure you don’t outlive your money. Formulating your retirement plan and getting a jump on savings as early as possible will help you reach $1 million—and beyond.

Ilyce Glink is the author of over a dozen books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In! Her nationally syndicated column, “Real Estate Matters,” appears in newspapers from coast-to-coast, and her Expert Real Estate Tips YouTube channel has nearly 4 million views. She is the managing editor of the Equifax Finance Blog, publisher of ThinkGlink.com, and owner of digital communications agencyThink Glink Media. In addition to her WSB radio show and WGN radio contributions, she is also a frequent guest on National Public Radio. Ilyce is a frequent contributor to Yahoo and CBS News.