Save, You Animals!

Why and how you should save.

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Most of you reading this, looking for some sort of advice or who are just financially curious, are probably the same people who give away your money, the second you get it. The goal to all financial success is your ability to SAVE! If you can’t keep more than €100 in your pocket without thinking about how you can give it away, then what hope do you truly have in establishing savings?

The savings you seem so hell-bent on not creating, is what will fund that business venture you have been thinking about; fund that investment property that just came up; or help fund that further education that could lead to a far more lucrative career than the one you are in. Fortune might favour the brave but it also favours the prepared. Being prepared is more than a mental state; it’s a financial state, a state of education, a state of experience and comes with a healthy portion of bravery. You need to be prepared financially so that you CAN act on that opportunity rather than saying “if only …”. It is your responsibility to be in a position so that you CAN act and CAN change your current situation for one that is far more attractive. This all starts with you saving.

 

What is a reasonable amount to save?

Well I don’t know all of your financial aspirations but I think its fair to say none of us would be overly upset with a nice €1,000,000 retirement sum. So with that in mind, below is what you will need to save per day (according to David Bach(http://davidbach.com/) author of “Smart Couples Finish Rich” (https://www.amazon.co.uk/Smart-Couples-Finish-Rich-David/dp/0767904842/ref=sr_1_1?s=books&ie=UTF8&qid=1485661247&sr=1-1&keywords=smart+couples+finish+rich) ) to save that sum by your 65th birthday. Note the importance of starting early.

  • Age 55 = €156.12 a day or €56,984 a year
  • Age 50 = €73.49 a day or €26,824 a year
  • Age 45 = €38.02 a day or €13,879 a year
  • Age 40 = €20.55 a day or €7,500 a year
  • Age 35 = €11.35 a day or €4,144 a year
  • Age 30 = €6.35 a day or €2,317 a year
  • Age 25 = €3.57 a day or €1,304 a year
  • Age 20 = €2.00 a day or €730 a year

For simplicity the calculations assumed a 12% annual return and don’t take taxes into account.

What I would say is that the earlier you start, the lower your savings amount needs to be, as you have more time. What you should really do is factor in your savings at the start of your pay cheque, not as an afterthought with what ever you have left over. A good plan to do this is to set up a savings account and have a set amount moved from your bank account in to this savings account on the same day your pay hits the bank. You will begin to forget its even happening and will live with what you have. If you can save €100 a week, then you are in a good position going forward. If you are a little older, then you will just have to use this saving to fund other investment opportunities that arise rather than allowing for simple compound interest to work its magic.

Find your base line price for living. Factor in how much this means you can save, and factor out how this impacts your plans for the future.

 

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