My goal was always to become financially free and have the ability to live my Life’s Purpose.
It just so happened that, when I crunched the numbers, I found out that I needed to make $5 million in 5 years.
[AJC: now, thanks to my book, this process has been highly simplified, if you want to do the same]
I failed on the time frame, but ended up with $7 million in 7 years and promptly retired, at the ripe old age of 49. Now, I blog here (amongst other enjoyable ‘give back’ things that I do).
Fortunately, the goal for some is a lot lower.
For example, in my last post I showed that – if you are happy living on just 50% of your current income for the rest of your life (after adjusting for inflation) – you just need to save 50% of your paycheck every week for the next 17 years.
If this is you, then you need to be reading blogs other than this; you need to save/save/save, max your 401k, pay off all of your debt, and stay very frugal. After all, living on half a paycheck is not easy 🙁
But, what about the rest of us?
Well, I asked you to spend some time with an online retirement calculator; if you took my advice, you probably found something like this:
This means that a couple earning a combined $50k a year today (with 20 years left until retirement), saving a full 10% of their income, has only a 50% chance of their money lasting as long as they do … even if they receive full Social Security benefits for the next 40+ years!
Without Social Security, this couple has virtually no chance at all (1%) of their money lasting as long as they do even if they save 15% of their paycheck for the next 20 years. If they manage to save 25% of their combined pay for 20 years, their chances of financial survival are still less than 25%.
How does creating an emergency fund, paying off all debt, and paying yourself first actually help these people financially survive after half a lifetime of work?
In the above context, I don’t think it helps much, at all.
Really, most traditional personal finance boils down to: saving 50% of your pay packet for the next 17 years, or taking your chances on Uncle Sam looking after you for the rest of your non-working life. The rest is fluff.
If that doesn’t appeal, stick around for the final part of this three part series, where I’ll share my strategies for real financial security.