The really hard core savers can quit their jobs in less than a decade by saving two thirds of their income.
#Shockingly simple math early retirement mr money mustache free#
This means a 21-year-old could be financially free by the time they are 37!
If you can save half your income, you can be done with work in 16 years. Saving 42% of your income will allow you to halve the usual 40-year working career that most people accept. If a working career is considered to be 40 years, you need to save at least 16% of your income to make sure you will have enough at retirement age. (Of course, going from 94 to 80 working years is still not going to cut it, but because the chart is exponential, there are some huge gains to be made at the low end). For example, you can slash a massive 14 years off your financial freedom date by upping your savings rate from 1% to 2%. For those of you with very low savings rates, some massive strides can be made by simply upping your savings rate by a few percentage points. Some interesting observations from the chart above: To see how this works in practice, the chart below shows the number of years it would take to achieve financial freedom according to your savings rate.Īssumptions: 12% returns, inflation at 6.28%, investment amount required calculated using the 4% rule Your savings rate is a really important number for you to know and to try improve because it is the only thing that determines how long it’ll take for you to become financially free. The amount of savings you put away as a percentage of your income is known as your savings rate (here is a more detailed explanation on calculating your savings rate.) And that’s because you are saving a portion of your salary every month and putting it towards your retirement. Most of us are somewhere in between these two extremes of being able to quit your job right now, and needing to work forever. On the other side of the spectrum, if you happen to be in a position where you don’t need to spend anything of your income, then it means you have already achieved financial freedom and could quit your job right now if you wanted to. 
You are a financial slave to your job, and without it, you will be sunk.
If you are spending everything you earn, you will have to work forever. In fact, how much you spend versus how much you earn is the only factor when it comes to figuring out how long it will take you to be financially free: The time it takes for you to achieve financial freedom has absolutely nothing to do with how much you earn, and absolutely everything to do with how much you spend. 
Now this example may be a little extreme, but it illustrates a very important point…. But you know what? I wouldn’t wish it on anyone. Because if you spend everything you earn, you will never be financially free. The result is that you spend R200 000 a month. You know, all the normal stuff that comes with the territory. You have the usual six luxury vehicles and four houses with matching golf course memberships. Imagine you are a top-rated doctor earning R200 000 a month. Well, that depends on how much you earn, right? The more you earn, the faster you can become rich, and the faster you can tell your boss what you really think of Hawaiian Shirt Day, right? Wrong. Okay, so the next question you are probably asking is how long is it going to take you? So you want to be financially free? Of course you do.
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