- Save 15% a year – The old and golden rule of thumb is that you could easily fund a stable retirement if you save 10% of household income every year. Even so, there are some experts that would advise upping that to 15%. Why? There are various factors to take into consideration. First of all, you should expect to live longer, because that’s just the best thing to do. Also, you should focus on having lower future investment returns, and also the demise of the pension.
- And consider saving even more than 15% – So the 15% guideline has its basis on two important assumptions: One is that you start saving when you’re 30, and the second one is that you retire in your mid-60s. You should consider saving even more than 15%, for example, 40% or even 50% of your income, especially if your goal is to move as soon as possible.
- Take care of your biggest expenses – Another smart move that you should consider is to limit your current consumption in order to save more for future consumption. You will likely hear from many financial gurus that you could be a millionaire if you’d only give up your daily latte! While it’s true that every little bit would help out your savings, go ahead and buy your latte, it won’t stop you from living well enough! However, make sure you take care of how much you spend on the next categories. First, there is housing. According to the Department of Labor, housing expenses are eating up a third of the average budget. Ideally is to buy or rent just as much space as you actually need to, and in locations that aren’t very priced. These tricks will free you up from hundreds of dollars every month. Another important thing to consider is transportation. As Kelley Blue Book mentions, buying a new car costs you as much as $40,000. Many buyers are taking bigger and longer-term loans just to afford these cars, and in many of these cases, they will still owe money on a car when they will replace it. It’s best to consider smaller to midsize fuel-efficient cars and keep them for over 10 years. The last but not least, food. Care to guess how much food it’s wasted every year in America? 30% of food that is bought by Americans is wasted, which is 4% of your annual earnings that goes directly down the drain.
