When it comes to saving for retirement, how much is enough? As a starting point, many experts recommend that you save at least 15% of your income for retirement. One of the loudest personal finance voices out there, Dave Ramsey, recommends saving 15% of your income for retirement as part of Step 4 in his seven baby steps to financial peace.
But what if you got a late start in your financial journey? The later you start to save, the less time your money has to compound and work for you to build wealth. And if retirement is close, it’s probably wise to move your money into less risky, lower performing investments. You’ll earn a lower return, but you’ll preserve more of your capital so your money is there when you need it.
Is saving 15% of your income for retirement always enough to live a comfortable lifestyle in your . . . → Read More: Is It Enough to Save 15% of Your Income for Retirement?
Are you taking actions toward becoming wealthy or are you actually just being cheap, likely never to get truly wealthy? And what’s the real difference? As Ramit Sethi often talks about on his blog, I Will Teach You To Be Rich, cutting out a few expenses is not going to dramatically change your financial future. In fact, if you ordered a tall latte every day before work for a year, it would cost you about $1,000. That sounds like a lot of money, but what if, during that same year, you started a side business that generated an additional $10,000 in profits?
As my nifty graph shows above, the difference maker was not those negative lattes, it was the positive business income. Becoming wealthy is often done by massively increasing your earnings, not by scrimping and saving your way into a poverty-stricken lifestyle.
Becoming Wealthy – When . . . → Read More: Becoming Wealthy or Being Cheap? Or Both?
Did you know that the median American savings is $0.00 each year? Since pensions are now nearly extinct and Social Security is teetering on the brink of failure, you’d think that Americans would be saving much more now than in the past. In reality, however, many are saving far less.
Take a look at the chart below. The bottom 90% of earners in America typically save less than 5% of their income each year. And, as of the year 2000, they are saving even less than that (even into the negatives at times)! Some people reason that the low savings rate is natural because the bottom 90% are earning less to begin with. I agree with this to an extent, but is a 3% savings rate really the best a family can do that’s earning more than $50,000 per year? After all, that would mean that they’re only saving about . . . → Read More: What If I Spent My Money Like 90% of Americans?
There is a new craze going around these days, and it’s called Extremely Early Retirement. While the majority of this world struggles to live paycheck-to-paycheck, a handful of individuals are enjoying an extremely early retirement at the age of 40, 35, or possibly even as young as 30 years old. How in the world is this possible? Well, sites like MrMoneyMustache and EarlyRetirementExtreme lay out the calculations pretty clearly. All you have to do is live on less than 25% of your income (and invest the remaining 75%) for about 7 years and you can officially quit your job and live off of your investments!
The chart above might appear intimidating at first, but it is actually a fantastic tool to figure out how many working years you’ll have to endure at various savings rates and investment returns. As with anything, it’s probably best to explain the . . . → Read More: Extremely Early Retirement – It’s Just Not Working
This post has been written by Sarah Brooks, a freelance writer fighting for financial independence within this world of materialism and consumption. Take a look at her awesome story below and her discoveries from her journey so far.
As a consumer living in America, we are surrounded by debt. Whether we’re adding to it, maintaining it or trying to claw our way out, debt is everywhere we turn. Debt is also a necessary evil—you have to have it in order to build your credit, but how much is too much?
When my now-husband and I met, the last thing we really cared about was our finances (just like everyone else, right?). We went on awesome vacations, purchased new computers and televisions, decorated our new apartment and didn’t think twice about going out to the bars a few times per week. Even though I majored in finance, being young and in . . . → Read More: The Brooks’ Story: How We Got Out of Debt, Saved, and Are Working Our Way Towards Financial Independence
Evil glares, loud conversation, irritable looks, and a plethora of canned goods. This is most definitely NOT what I want my future life to be like, but this IS what I witnessed yesterday.
I raided my cupboards and my fridge yesterday, only to discover that it was time to spend some more money on food. Off to Aldi I went, the land of $2.69 milk, $1.29 eggs, and $0.89 bread. It truly is a marvelous place. However, it seems that not everyone thinks so. The moment I walked through the doors my ears started ringing with old lady bitterness. “What are you looking at that for?! We don’t need it!” shouted the 70+ year old woman at her old, but seemingly capable husband.
They dressed poorly and were noticeably price conscious of every single item that they put into their bags. Their general demeanor wreaked of negativity and frustration. Their . . . → Read More: That Was the Exact OPPOSITE of What I Want My Life to Be Like
Have you ever purchased something that you hoped would increase your income? If you just read that sentence twice and have a blank stare on your face, then I suggest you keep reading. If you nodded in agreement, congratulations! I am so excited for you and hope that you can learn even more about wealth-building assets from this post.
The Typical American Citizen
For quite some time now, the average American citizen has learned how to spend absolutely everything that they earn each month, with very little (if anything) left over for savings or investments. In the example to the right, the family earns $2,800 a month in after-tax revenue. Their monthly expenses include their home mortgage, food, clothing, utilities, car payments, gas, insurance, and then a plethora of smaller items, which somehow end up totaling the same amount as the income line. It’s nearly magic how the . . . → Read More: Reinvest Your Profits to Grow Your Wealth Exponentially
As I was leaving work the other day I spotted a brand new Infiniti QX70 SUV, and I admit it… I drooled a little. This car was absolutely gorgeous and I know that I would look soooo good behind that steering wheel. Since I have no debt (outside of my mortgage of course), I’m sure I could qualify for the loan and start driving one tomorrow, but how much would this really cost me? And not just the cost in dollars, but how many years of retirement might this purchase cost me? Would it just be a couple of years or would this move be the difference between retiring with a dark, full head of hair, or a white whispy combover?
The Initial Cost of the Purchase
These luxury SUVs sure are gorgeous and they do have many of us drooling, but how much do they really cost? . . . → Read More: How Many Retirement Years Will That New Car Cost You?
Every single one of us tends to judge our friends’ spending habits. “They spent $3,000 on their weekend vacation? That’s crazy!” But, all the while, you may be spending $5 each day on our fancy Starbucks lattes, which probably isn’t the wisest way to spend your money either. No matter how irresponsible our friends are with their money, I am sure that there is something I can find in your bank transactions that is pretty stupid too. It is just human nature, and quite frankly, we all need to have some hobbies and they will ultimately cost us money.
Some Money Wasting Hobbies
Scrap-booking Softball league High-tech gadgets Coffee/Lattes Golfing Dance Boating Camping Stamp collecting Sports card collecting Fashion (designer clothes, purses, accessories) Home decor Fishing Hunting Shopping Photography Attending sporting events/plays/musicals Bicycling/running
Did I mention a hobby that you can relate to yet? I hope so. Each . . . → Read More: How Much Is Your Hobby Costing You? Is It Worth It?
Our culture today is all about making a large income and buying a bunch of stuff on credit to “enjoy life to the fullest”, but in my experience, this often leads to discontentment, stress, and a constant want for more. One would think that the higher income earners would have a ton of money socked away in the bank, ready to retire at any time, but this isn’t how it typically works is it?
If one’s salary is $50,000 a year, they might finance a brand new Chevy Malibu. If their salary bumps up to $100,000 a year, they finance a mid-level Mercedes. If they are earning $200k+, they suddenly find themselves in an $80,000 Infiniti SUV and an executive home on the lake! As the pay grade increases, so does the lifestyle. As for that savings account, it might be a little beefier, but nothing like it could be.
. . . → Read More: How Quickly Could You Retire If You Had No Debt?