Let me give you a simple formula so you know what amount you are working towards
How much do I need to save so I can retire
Normally I ask people this simple question:
How much are you earning now?
Ask yourself, how much salary are you earning now per month?
Say for this example it is $2,000 p/m
That is after taxes .. so clean
That simply means you need to create an income of at least $2,000 x 12 = $24,000 p/y
Okay next question:
What kind of investment risk are you willing to take? What investment tool do you feel comfortable with?
You see there is a financial law.
Higher the risk → More Profit Potential
Lower the Risk → Lesser Profit Potential
So say you feel comfortable with stocks .. that means you can realistic expect between about 10%-12% per year interest.
Need $24,000 → 24,000/10% = $240,000
So you need at least a capital of $240,000 to be able to continue the lifestyle you are living right now
So say you feel comfortable with bonds .. that means you can realistic expect between 6%-8% per year interest.
Need $24,000 → 24,000/6% = $400,000
So you need at least a capital of $400,000 to be able to continue the lifestyle you are living right now
Final example, say you feel comfortable with options .. that means you can realistic expect between 15%-20% per year interest.
Need $24,000 → 24,000/15% = $160,000
So you need at least a capital of $160,000 to be able to continue the lifestyle you are living right now
So you see it is quite easy to calculate the amount you need to save before you retire. Total amount you need depends on the risk you are willing to take.
Once you have an amount .. work out a step by step plan how to save that amount before you retire.
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