Money Management – Can You Afford It?

On the face of it you can, because there’s the money in the bank that’s maybe not doing much. After all, the bank is paying you 0.00001% on your deposit account, you don’t understand the stock market so there’s no point risking it there because you could lose a lot more than whatever you’ve seen in the shop will cost you. Why not treat yourself?

But do you have a financial plan?

Honestly, if you don’t have a financial plan, you’ve absolutely no idea if you can afford that new thing or not! Absolutely none!

Let’s go back to basics

You want to have a certain amount of money and assets by a certain age. I would suggest at least $1M by the age of 50 including your house, pension plans and whatever as a minimum. For a couple, it’s at least $1.5M.

Work back from there and figure out how much you need to save every month to get there.

If you’re 25 years old, you need to be socking away $500 every month for the first year. The next year, $600 a month. The year after that, $700 a month, and so on, increasing your savings rate by $100 per month every year. If your savings grow at 7.5% a year, you’ll be a millionaire by 50. Just! And you’ll probably have to pay some taxes along the way on your investments…

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