Every piece of advice I received from the time I got my first job was… “Start saving now, you’ll thank yourself down the road”. As a young professional everyone tells me to save, save, save! Which is great, I totally agree, BUT I also own a home, have to buy groceries, food for my dog, clothes to continue looking professional, AND believe it or not I like to enjoy the odd night out. So all of this advice about saving has been great and I completely agree with it but I need a little more information and incentive to start. How much should I really be saving and what should I be saving for?
Retirement- It’s a no brainer, we all want to retire, and the goal is usually as soon as possible. An article in TIME gave age benchmarks for how much you should have saved and by when
Here are the guideposts:
•At age 35, you should have saved an amount equal to your annual salary.
•At age 45, you should have saved three times your annual salary.
•At 55, you should have five times your salary.
•When you retire at age 67, you should have eight times your annual pay
Scary right?… Ok, now I am freaking out. I’m already 26, so I have less than 10 years to get to my first benchmark! To make calculations easy let’s say I make $3,000/month or an annual salary of $36,000. This means in 9 years I need to have saved $36,000 (ahhhh!) That breaks down to $334 a month and because I get paid bi-weekly only $154 a pay. That’s actually only 11% of my salary which doesn’t sound scary at all. When you look at the big picture and the big numbers it can be very intimidating, but it’s helpful to break it down into pay periods and percentages.
Most articles and advice will tell you to save 15%-20% of your total income for retirement, and if you can do that, great! At this point though, I am liking the looks of that 11% so in the next 9 years I can buy the car I want, move into a bigger house, build a professional wardrobe and maybe even start a family which I KNOW is going to cost me. Once I get to those later benchmarks I should be in a good position to increase the amount I am putting toward my retirement and the nice part is I will already be on track for what I need to have saved!
Commercial Lending Officer
QuintEssential Credit Union