Save. Spend. Splurge.

The Harry Potter reason for saving for retirement at a young age

This is a reader question that turned into a post…

This is such a good question because I feel like no one ever covers retirement or long-term planning when they’re young. 30, 40 years seems like a long time off to many, but before you know it, you’re turning 40 and you only have 25 years left to save what seems like a whackload of money.


Before I get into what I would advise, let me talk about why you should even think about it when you’re in your 20s or younger (I wish I had started when I started my first JOB, to be honest, I should have been filing tax returns at 7 or at least at 16 when I had a “real” job that paid “real money”.

The sooner you start, the faster, longer and farther your money will go because the thing that young people don’t realize is that time is the best investing help you can ever receive.

I hate to trot out any old diagrams and charts but… compounding interest (of which time is a major factor) is like money magic.

People in the PF world hate hearing me use the word “magic” to describe this concept because it conjures up Harry Potter and pots of wizarding gold held by goblins, but it is the only way I can describe it to make it understandable by others.

If you save from the age of 25 to 40, and save only $150,000 over that period of time which is 15 years, and $10,000 a year, you will have (based on numerous factors), about $1.058 million saved by the time you retire at 65.

If you save from the age of 35 (just starting a MERE 10 years later), until the age of 65, which is a 30 years in total or double the amount of time, and not only that, save double the amount at $300,000 over that period of time (same $10,000 a year), you will only have $838,000 saved by the time you retire.

This is a full $220,000 LESS.

Just because of 10 measly Weasley years.

From this, we can conclude that every year you put off saving, you lose a future equivalent of $22,000 a year.

Or a little over double what you actually put into the market ($10,000).

Does that scare you into investing right this second?

It should.

If you haven’t started saving for retirement, START TODAY DAMN IT.


THIS VERY DANG SECOND. Don’t even give me “but”… excuses and nonsense. You only need $100 and you can get started.

How? Check out Investing like a Boss – It only takes 4 hours a YEAR & my companion aid – The Investing Tool.


Now that my red flag urgent warning has scared you into scrambling into your couches to scrounge up $100, let’s talk about what you SHOULD talk about when you’re a couple.

I’ll go over it in general because I cannot give you specifics without knowing your situation. If you really want me to go into your details and your situation, I do offer consulting services, and have already helped others set up a plan to get on track.

What are your current / future goals or plans?

Do you have a vacation planned this year?

Next year?


Do you plan on embarking on any major event (marriage, a new family, etc)?

With those goals, what are the dollar amounts budgeted or estimated towards that? I know it sounds weird to say:

Hey babe, how much money do you think we need to have saved to start a family?

.. but consider that she can only work up until her delivery day, and if you are not lucky to be in Canada and/or with an employer who is generously giving you a whole year off*, then you need to factor in how long she plans to be off work, if she plans on going back to work (maybe childcare is prohibitively expensive for you and it is cheaper for ONE of you to stay at home afterwards, not necessarily HER *cough cough*), and all of THAT.

You need money saved to tide you over, make up for your income, or just even to cover the cost of a baby, which I can tell you is more than you think but does not have to be $10,000 a year as purported.


*I live in Canada but did not get any money while on “maternity leave” as I am a freelancer.

How much do you spend today?

Now we get into the details. If you don’t already track your spending, it is about time you do. You need to know (REALISTICALLY) how much you can save from your incomes to put towards saving and retirement.

General rule of thumb is 10%. I am more in favour of 20% if you can hack it. 25% would be my suggested ideal.

For myself, I can’t really put a finger on how much I save per year because my income fluctuates, how much I take out changes, and then some times I don’t work at all so I eat into my savings… but on average, I save about $50,000 a year since I have been working.

Since I have only worked about 50% of my career, this means if I worked a full year, I’d save about $100,000 or half my salary – 50%.

That’s a very comfortable number, and open to interpretation (I am not into tracking what I have saved, invested, and all the details on that because… as long as my net worth goes up, I’m a happy camper).

That said, save what you can.

Save now.

Save early.

Don’t wait for 10%. Even 1% will do at this point, as long as you start now and early.

Over the next year or so, you can then increase the savings amount by logging your expenses and tracking them (plug plug – I use The Budgeting Tool, and have since I slayed $60,000 of debt in 18 months with it), and find where to cut the (true) fat in your spending diet.

By fat, of course, I mean things that you pay for but could do without.

In a recent example of this, I cut out $100 from my spending by eliminating yoga classes and opting to do them at home instead, twice a week instead of 5 times which was not realistic as a schedule to keep up considering that my work demands have increasingly gotten worse, every day I stay here.

(More Money Tips here)

$100 may not seem like a lot per month, but it was $100 wasted on something I didn’t really take full advantage of.

In contrast, I strongly considered cutting out the $240 parking expense per month and just taking the bus, but Little Bun would be a freakin’ nightmare, so this is not possible until he is able to be dropped off by his father and then (happily) picked up by me after work – I could actually go home by bus, then take my car and go pick him up from the local school… $240 for me for parking, is money WELL SPENT with a child in tow.

Discuss your spending and where you can put more money to reach 10% – 25% of savings, and to STILL be comfortably happy and not feeling deprived.

Do not deprive yourself down to beans and rice because like a rubber band, it will snap back and hurt like a motha. (And yes, I speak from experience…)

When would you both like to retire?

Some people, don’t want to work until 65. Others like me, have opted to have a loose interpretation of retirement. Others, never want to retire.

From my perspective, I love my job. I love working, the environment, the challenge, and considering that I have only really worked 50% of my career, I feel like I am already partly retired.

In between contracts, I chill. When I am on contract, I make the most of it.

I prefer this kind of slow, give and take lifestyle because it gives me time to take sabbaticals in between contracts (although don’t be fooled, I do come under intense pressure and stress about 6 months in of pulling in a zero income); but overall I enjoy my lifestyle and choice even if some days are very stressful.

I plan on doing this until I don’t want to do it any more. When will that day come? I don’t know. For now, I don’t want to stop working, I love it.

Whatever your retirement age / date is, figure it out together then calculate backwards to figure out how much you BOTH need to have saved TOGETHER to make that goal.

See how much emphasis I am putting on you as a couple there?

I am in an unusual relationship in that we are both responsible, individually, for saving money our retirement, as we make similar incomes, BUT, we have a joint understanding that the other one is not going to put up with any kind of nonsense of “Oh I’d like to retire early at 45 and then lie on a beach all day while you make up the difference”. NUH UH.

Once you have the ages you’d LIKE to retire at, this brings me to the last question….

How much (approximately) would you need by retirement?

So if it’s 40 years off for both of you, that means if together, you need $1,000,000 to retire (I am making up numbers here, read – how much do you need to retire), then it means you need to save about $25,000 a year.

Hold up.

You might be at this point internally screaming:



That number is misleading because it is not NET savings of $25,000 a year or around $2000 out of your budget, but instead, far less.

Remember magical compounding interest I was referring to before?

Saving $10,000 a year, to obtain about $22,000 in “savings” after compounding interest gets its sparkly paws on it, which is a far more achievable $833 net a month.

It’s still a big chunk of money, don’t get me wrong, but it ain’t $2000 you gotta save yearly.

Now if you are starting later than 25, and you don’t have 40 years to save, you will need to at 35 years old, save double that amount to catch up.

For every year you procrastinate, it costs you real money at the end.

There you have it.

Some general questions to chit chat about over your weekly Thai takeout (umm.. might want to look into cooking that ish instead of buying it with that 2X markup restaurants charge), and to get started on your financial bliss together.


  • Jeannie

    Compound interest really is magic, but unfortunately you need patience because time is the magic ingredient. So personally it helps me to look back at compound interest charts from time to time. Zach @ fourpillarfreedom has particularly nice charts to refer to.

  • Ati

    I’m so happy that you answered my question (guilty!) not only with a post but also a reference to my favourite book!

    We’re not exactly a young couple (shy of turning 35 in a couple of years) but we’re in a unique situation where we’re now earning in a high-income country with the intention to retire to developing countries splitting time between 2 countries where we came from.

    It gives us the leverage of living lean and save as much as we can to retire with hopefully more money than we need; but we don’t want to not save enough bearing in mind contingencies like taking care of parents, potential illnesses/health care, etc. Not to mention the currency differences!

    In short, it’s a nightmare to figure out. But your questions will nudge us in the right direction for a start, fingers crossed! 🙂

  • Financial Orchid

    Your products – books + scarves were one of the big inspirations for me to start my own blog! Even tho the #s are negligible it’s still fun seeing sales numbers !

  • Troy Bombardia @ Bull Market

    You also have to factor in inflation though. $1 million by the time you retire is not the same as $1 million today.

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