How I plan on saving a million dollars by the time I retire
- I am currently 31 years old.
- I have about $294,000 saved as my net worth.
- I earn anywhere from $15,000 – $25,000 (average) gross a month when I work on a contract.
- In the past 8 years of working, my gross income has averaged out to be about $67,000 a year.
- I haven’t worked 100% of the time; in fact I think I have worked about 40% of my career so far.
WAIT, WHAT? HOW CAN YOU BE SURE YOU CAN MAKE THAT KIND OF MONEY?
I actually just gave up a $250,000 contract to be in the same city as my family.
Update: but then I got another one, so things worked out!
After company taxes and about $2240 in expenses (including daycare, and these are just MY half of the expenses, not our household expenses), I estimated that I would have netted about $165,000 in savings in a year.
This is not unusual or farfetched, because in one of the years I worked, I banked $130,000 (net) after taxes, and I didn’t even work the full year (I worked about 9 months).
…but that is neither here nor there, and yes I am looking for a local contract now.
- To save at least a million dollars by the time I retire.
PLAN A: WHAT IF I SAVED $50,000 A YEAR?
- I earn and can save about $50,000 net a year on average.
- My money will grow at a modest 5% rate.
- I have 34 years to save (age of 65 to retire).
When I plug all that into a my budgeting tool‘s Assets calculator, I get this amount:
I think I’ll be all right if I can save $50,000 net a year on average.
PLAN B: LET’S DROP THOSE SAVINGS DOWN TO $20,000
Now, if I can’t, and worst case scenario is I only save let’s say $20,000 a year (net) on average, it gives me this amount:
With 3 children (my ideal), let’s assume it takes $250,000 to raise each child (I think this is rather high because it probably includes paying for their education as well), then my number drops down to:
$1.78 million – $750,000 = $1.08 million
I JUST squeak by saving a million by the time I retire.
Of course, these numbers are conceptual because I don’t save $20,000 or $50,000 regularly and consistently each year. I save it in a big chunk, like $130,000 one year, nothing the next year.
Then maybe another $60,000 then nothing the next year.
So… that’s how I plan on saving a million by the time I retire.
I do think I will end up with more than a million, and I may even end up retiring early at 55, or doing a semi-retirement thing.
It all depends on my contracts and what I can get.