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How much you pay yourself first determines how quickly you can reach financial independence.
Let's say you're making $60k per year at a job.
Your salary grows at 4% per year.
Assume 8% growth on your investments.
Let's see what happens
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Let's say you're making $60k per year at a job.
Your salary grows at 4% per year.
Assume 8% growth on your investments.
Let's see what happens
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Let's say you pay yourself 5% first.
This is entirely doable by contributing to your 401(k) up to your employer's match.
You become a millionaire at 58.
Your nest egg will grow to $2.3 million by age 67
This is entirely doable by contributing to your 401(k) up to your employer's match.
You become a millionaire at 58.
Your nest egg will grow to $2.3 million by age 67
Now let's double that to 10%.
Potentially doable by 401(k) match alone, or increasing it slightly above the match.
You become a millionaire 8 years earlier at 50.
Your nest egg doubles to $4.6 million by age 67.
Potentially doable by 401(k) match alone, or increasing it slightly above the match.
You become a millionaire 8 years earlier at 50.
Your nest egg doubles to $4.6 million by age 67.
Let's double again to 20%
This is entirely achievable and used to be common wisdom.
You become a millionaire at 44!
Your nest egg double again to $9.6 million at 67.
This is entirely achievable and used to be common wisdom.
You become a millionaire at 44!
Your nest egg double again to $9.6 million at 67.
Finally let's do something that seems outlandish, but is also possible.
50% savings rate.
You become a millionaire at 36!
Your nest egg will be $23 million at 67.
50% savings rate.
You become a millionaire at 36!
Your nest egg will be $23 million at 67.
As you can see, doubling your savings rate doubles your outcome and can significantly accelerate your goal of reaching financial independence.
Savings rate is a significant lever to pull.
Pay yourself first, Pay yourself often!
Savings rate is a significant lever to pull.
Pay yourself first, Pay yourself often!
