Sunday, 21 April 2013

How much should you really save

As an entrepreneur I have no pension. I also like to talk about success and that is more than just building apps. So on this blog you will hear some financial advice as well.  Surprisingly most people don't have a pension at their job. If you are under 30 you stay at a job for 3 years before you get board of it and you move on. So even then you are not really eligible for a pension. Furthermore pensions have changed and they do not favor you as much as they did in the past. Most people think that a pension is where the company just pays you money. In reality you build your own pension.

So how much should you really save? Well you should save about as much as you pay rent. Let's assume that your rent is 1000 per month you should save the equivalent. But really you should save about double. If you do the math, you should roughly have 500k saved up by the time you are 65. Here is the formula

Age - 65 * -1 *12 * monthly savings

So if you plugin the numbers(assuming you are 25)

25 - 65 *-1 * 12 * 1000 = 480 000.

So if you want a million dollar pension you better start saving. In fact you should probably put 2k in per month. If you have a plan where the company will match your investment then 1k should suffice.

But good luck finding a job that pays you enough to actually do this. One thing you can do is start a business and 100% of those proceeds go to retirement.

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