I have made no secret that part of my dream is to retire early and achieve some kind of financial independence, so that me and my husband can escape the 9-5 life and make our time our own. Now, saving for retirement is something that we all know we should be doing, but what kind of percentage is good enough?
If you read traditional articles about retirement, they suggest 10% is a good number to save each and every month for retirement. If you do that consistently each and every month from the time you start work until you retirement, then in theory, you should have enough saved/invested, along with the government pensions, to retire. In fact, for some months and times of life, 10% might seem like quite a good achievement. There are always going to be stages in life when money is tight and saving anything at all is better than nothing.
But, realistically, it isn’t enough to save 10% of your income each month if you want to retire early. Some people in the PF blogging world save 70/80/90% of their income each month – how insanely awesome is that?! I mean, the numbers that they must save each month bump up their fund so quickly, combining that with compound interest and the numbers speak for themselves. In fact, the less you need to live on, the quicker your early retirement date can be, purely because of how you spend your money.
I am slightly embarrassed to say that we tend to save approximately 35% of our income right now (though April was a write off). Definitely better than a lot of my peers, I suspect, but not enough if we are to ever reach our financial dreams. Imagine the freedom of being able to save 50% of our income and live off the rest? The stress and pressure surely will be less and less. As the number saved (or invested) grows, the interest on the money will grow as well, meaning that the number rises faster. By lowering living expenses, and therefore saving more means that your final number doesn’t need to be so high either, as your living costs are lower!
This is why I’m aiming to save 50% of our income. Our ultimate dream fund can only be funded by money we bring in and don’t spend, so the higher the number we can save and put into that, the better. The only slight spanner in the works at the moment is the obvious fact that in August, our income will be lowered quite substantially whilst I am on maternity leave. Also, as we have no idea how much a baby is actually going to cost us, hitting 50% every month might stretch us. But, what’s an idea without a bit of challenge?
There are two ways I could do this:
- I could lower our living expenses. Our budget is pretty bare at the best of times, but one way to ensure you save 50% of your income is to lower your overall expenses. However, there is only so low your expenses can go, and I’m not sure that we would consistenly hit 50% with our income vs. outgoings so the other option is….
- Increase our income. I suppose the amount of money you potentially make is endless, if you have the time, energy and motivation to make it work. I am still thinking through some side hustle ideas, though I’ll be honest, actually taking the first step is particularly daunting to me. But, bringing in more income would be a sure way of us hitting the 50% savings goal. I am more and more confident about taking the first step to bringing in some extra income, though I don’t know why I’m finding it so hard? Perhaps I’m worried that I’ll fail….
Overall, I’m aiming to save 50% of our income to we can fund our dreams of early retirement and freedom to do what we please, rather than what our 9-5 jobs dictate we do. If that’s not motivation enough, I don’t know what is!
Do you save 50% of your income? How do you ensure you manage it consistently? I’d love to hear from you!
Follow me on:
Facebook | Twitter | Instagram | Pinterest
I save over 50% of my income and have done for a few years now. I think in the next 2-5 years I will start to feel the ball start to grow bigger but I have to admit the first few years were really tough. I think the only way I managed to do it was by living with parents, automating my savings and having this ‘financial independence’ target really woven into whatever I have done.
I still eat out around once a week, but rather than high end places ill choose somewhere cheaper. Also taking lunches into work rather than buying them saved me a lot…
What age would you like to retire at?
Hopefully 50, though who knows what might happen between now and then! 🙂
My goal has been to save half my income for sometime I’m currently at 18 percent so I have a lot more to go. Great post
18% is better than nothing 🙂 good luck!
I’m in awe! I think 50% is a great goal, and I’m ashamed to say that our savings are probably more like 1% whilst we save for the wedding. Once we are back from our honeymoon next month I can’t wait to see how things improve!
I don’t imagine it’ll be plain sailing, but it’s definitely an aspirational aim 🙂 thanks for stopping by!
Hopefully, I can save as much as 50% of my income. But, now, I cannot because of student loan and car loan. I just wish I just got a used car instead of a brand new one. Although I pay these two, I can still manage to save 15% of my income. Not bad, isn’t it? Thanks Nicola, I’ll let you know how you can be of help in my meal planning.
15% is not bad at all 🙂 so much better than nothing!
Hi
Came across your blog to say hi.
Read a few of your posts and they are great, including this one.
I used to save quite a high percentage of savings previously before marriage until we have kids where we tend to slow down on the savings. Just make sure that we don’t see this savings event as another rat race that we are being pressured into. It’s not a race 🙂
Thanks for stopping by 🙂 I’m hoping that when the baby arrives in the summer, it won’t have too much of an impact on our savings potential, but in all honesty, I have no idea what’s going to happen!
You have to be in a decent income in the first place to save 50%! If I did that I wouldn’t meet my bills and eat! It would make life now so miserable that it wouldn’t be worth the early retirement. There is a healthy balance to be found I think.
That is very true – we will probably need to have an increase in income to meet this aim every month, but it’s definitely an aim of ours 🙂
I saved 50%+ for about 10, which was possible because I had a good education with no debt (I worked full-time during school), so I was able to get a good job, and live like I didn’t. Not everyone has this opportunity, and even if you do, you have to fight the social pressure to keep up with your peers.
Once my twins were born, daycare would have taken most of/ all of/ more than my after tax income for the first 5 years, so I stayed home with them. If you don’t have to pay for childcare (or when school becomes the childcare) you can come out ahead.
I also feel like it is unfair to save your money at the expense of others, such as parents. Living at someone else’s home rent free, letting someone else pay your expenses, or expecting family to help with your children without pay so you can come out ahead just doesn’t seem right, even if they are willing. Part of my financial freedom includes a standard that I never expect a free lunch, even from very well off family and friends.
I actually really enjoy working! So I hope not to retire for a long time, though I have cut back on work hours so I can be home for my kids- this time is more valuable to me than retirement.
Me and my husband used to save a bit more than 50% of my income before we had our baby. Now we are at 30/40% because of childcare costs and delivery food (we are trying to avoid but it’s hard!).
You can always cut some of your daily costs but I think you are already frugal so there shouldn’t be much more you can do.
Keep us updated on your side hustle, I have the same problem as you, would love to go to 50 or 60% of savings rate and I fell like an increase in income is the only way (and cutting on delivery food!). But I do not have many ideas for a quick generating income side hustle 🙂