Put Your Financial Adult Pants On
Summary: The future is creeping up on all of us. If you’ve been avoiding thinking about it, it’s time to get serious about retirement and your goals. We know its hard but it’s time for some financial adulting.<br> The Future Happens With Or Without You<br> Some of us put off worrying about money for a long time. When you’re in your twenties and thirties, retirement seems so far away that it’s not worth thinking about.<br> But the clock is ticking and you are wasting the most powerful thing in personal finance, the power of compounding interest. The longer your money is invested, the more it grows. There is no substitute for the power of time. This is the time to pay iff your debt, <a href="https://www.listenmoneymatters.com/work-from-home-jobs/">grow your income, </a>start investing. and grow that <a href="https://www.listenmoneymatters.com/average-net-worth-age/">net worth</a>.<br> Whether you think about the future or not, it’s happening. Well, there is no time machine to take us back and invest our money earlier but if the best time to start investing was when you were 18, the second best time is now. <a href="https://www.listenmoneymatters.com/how-to-adult/">We know, adulting is hard.</a><br> Know Your Number<br> Another reason people don’t give too much thought to retirement savings is that they have no idea how much money they need to save for retirement. You need to know your number. But which number?<br> Most people want to know the number they have to have saved to retire. But there is a more important number; your savings rate.<br> There is a <a href="https://networthify.com/calculator/earlyretirement?income=50000&initialBalance=0&expenses=20000&annualPct=5&withdrawalRate=4">calculator</a> you can use to get the percentage of your income that you need to save to retire in X number of years.<br> The calculator assumes that you have $0 in savings and $0 in debt so you’re starting from a blank slate. That isn’t the case for most of us so you can use the number you get as a ballpark.<br> The average US Savings rate is 6% of income. By saving just 6%, you will have to work for 62 more years before you can retire. A savings rate of 27.4% means you need to work for 30 more years.<br> A savings rate of 53.6% means you need to work for 15 more years.<br> Okay, good. Now we know how the percentage of our income we need to save to retire in X years. But how can we come to the big number, the total we need to save before we can retire?<br> There are lots of complicated theories and formulas about how to arrive at your retirement number but LMM likes to keep it simple. That’s why we like the <a href="https://www.listenmoneymatters.com/4-rule/">4% rule.</a><br> The first thing you need to do is estimate how much money you will need a year during your retirement to pay your expenses, all of them, housing, utilities, food, travel, etc.<br> For many people, living expenses decrease during retirement. We may downsize our home as we become empty nesters or will have paid off our mortgage.<br> We are no longer tied to an area because of work. You might have lived in and worked in a city because that’s where the higher paying jobs were but you can live anywhere you want in retirement and that might mean a place with a much lower cost of living then you were living in during your career.<br> You won’t have the expenses associated with having a job and hopefully will no longer be supporting children.<br> The 4% Rule<br> Come up with a number you can live on each year and then maybe increase it a little to err on the side of caution. Now we can employ the 4% rule to know how much money we need to have in our retirement pot.<br> The 4% rule is a benchmark that can be used to calculate how much money you can withdraw from your retirement accounts every year for your expenses for at least thirty years without depleting tho...
