Spending less (or earning more) should be your go-to action, when wanting to up your savings percentage, no doubt! But don’t be shy to also consider aiming for above-average investment returns! □ For the average Joe, using a net return of 5% as a base might be more realistic than 8%, but sometimes being average is just really…boring! □ So whatever you do, I’d encourage you to aim as high as your risk profile will possibly allow you! Why settle for 5% if you can hit 7%? It will certainly depend on your ability to pick above-average investment vehicles. Obviously the higher the return the shorter the journey…40% savings rate with an 8% return will make you FI in 18 years.īut is an 8% return on investment realistic (long term)? Judging from the FIRE community though, it seems like anything is possible if you set your mind to it, and are willing to live less extravagant than the average person □įor some 50% will be achievable, and for others it wont.īut what if we played with (just for fun?!) the idea of an above-average ROI? Let’s just say, 8%? How would the table then look? I’m not going to be the judge of that, as it’s been a while since my salary was average. Which is why I’m now sharing this with you TODAY, so that you can (hopefully) avoid making the same mistakes as I did! □īut what about the average person with an average salary? Is a 50% savings rate for the average Joe at all possible? Had I known about “The shockingly simple math behind early retirement” 5 years ago, I’m fairly sure I would have made a different choice in housing (among other things). – Remember I live in an expensive area in an expensive house with an expensive wife, a kid, two kats, two cars and 6 chickens…). I have an above average paycheck, so for me it would certainly be realistic (my current savings rate is somewhere in the 15-25% range though. How realistic is it, for a regular person to live a normal/half decent life with a 50% savings rate? When i first realized this fact it absolutely blew my mind! 17 years?! So from the table above, we can see that IF we somehow manage to live our lives for 17 years with a 50% savings rate netting 5% interest on our investments, then we’re home free! Shocking indeed, no?! □ Just think of this assumption as a nice generous Safety Margin.
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