I see a lot of questions along the lines of "I'm BRAND new to financial planning, I have no idea what to do first, I have no idea what to save for retirement, or how much to save, or how to save, ahhhhh" and they're very stressed.
Sometimes these people have NO savings and that's when the Dave Ramsey "save up $1000" baby step is a nice idea. I'll say a lot of other negative things about Dave Ramsey but he's good on that one. With a $1000 emergency fund, you've proven that you can save money. If you need a car repair, vet bill, emergency family visit, you have that cushion.
But that's the "right now" first step. What about the retirement first step?
I recommend calculating your annual spending.
This isn't "make a budget" - you can do that later. In fact you should definitely do that LATER, how do you get where you're going if you don't know where you're at?
This means sitting down and downloading all your bank statements, credit card statements, whatever else you use to "pay" things and looking at those totals.
If you just have a phone, you might not have the patience to go back 12 months. So go back 3 months. Look at your last 3 months of credit card statements, see what the "purchases" lines were, and average that out.
FIRE math says you can retire when you've saved up 25x your annual expenses. If you can lower your annual spend, you don't have to save up as much. If it increases, your account has to increase.
LeanFIRE is the term for minimalism - people trying to live on less than $50K a year so they can retire on $1.25M.
FatFIRE is for people trying to get as much money as humanly possible because they need millions to be happy. I question their ethics so I won't write much about them.
But both sets have the same idea... they know how much they spend so they know their goal, and that's where they're going.
Comments
Post a Comment