So what is the simplest way to increase your savings rate?įirst, take a good hard look at your expenses and see what you can live without. If you make $50,000 per year and save $25,000 per year, you are on a 17- year track for retirement. If you make $100,000 per year and you are spending $90,000 per year, you are still on a 51-year track for retirement. We all can control how much money we spend. Money Moustache’s shockingly simple math focus completely on saving, not income. The thing I hear most from people when I talk about FI is, “that’s nice for you, but I don’t make enough money to ever do that.” While it is true, the more money you make, the easier you will be able to reach FI, but Mr. The following table reinforces the fact that our savings rate is the most critical factor in reaching financial independence.Ī discussion on the 4% rule and the “25 times rule”Īssumption 3: Since you want this money to sustain yourself forever, you will only be withdrawing the “gains,” not the “principle.” This ties in with the “4% rule”. Money Moustache has simplified things even more for all of us by doing the math to show us when we will reach FIRE given different savings rates. Sometimes in life, the simplest things are incredibly difficult. I never promised an easy solution, but it is simple. You simply need to save around 65% of your take-home pay over the next 10 years. How much you can live on: How much money would you need (not want) to cover all your living expenses at your desired lifestyle. Savings rate: What percentage of your take-home pay are you saving/investing? Think of this as the actual money that gets deposited into your bank account on payday. Take-home pay: How much of your income you keep after all taxes and deductions. For many, this is the point where they decide to retire (if they don’t have to work, they won't) hence the term Financial Independence & Retire Early (FIRE). Put simply, reaching FI means you don’t need to rely on your job to cover your living expenses. You have reached Financial Independence and have the ability, if you choose, to Retire Early once you have reached a point where your savings and investments can cover your living expenses for the rest of your life. Both Financial Independence (FI) and Retire Early (RE) amount to the same thing as it relates to your savings and investments. Let’s quickly define a few terms here, so we are all on the same page.įinancial Independence/Early Retirement (FIRE): In the personal finance community, these terms are often used interchangeably. Money Moustache knows that the m ath behind early retirement is shockingly simple The more of the take-home pay that you save, the earlier you will reach financial independence and be able to retire.
0 kommentar(er)
