How much you should have saved by the time you’re 30

Discussion in 'Money Management & Banking' started by chylld, 2nd Nov, 2017.

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  1. chylld

    chylld Well-Known Member

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    Financial expert savaged for savings advice

    Obviously the tabloids will focus on the upset people, but I thought I'd take a simplified look at the post in question:

    ss (2017-11-02 at 02.28.34).png

    I interpret this as:
    Between 22-30, save 1/8 (12.5%) of your income
    Between 30-40, save 1/5 (20%) of your income
    Between 40-50, save 3/10 (30%) of your income
    Between 50-60, save 1/5 (20%) of your income
    Between 60-70, save 1/5 (20%) of your income

    To me this doesn't sound too ridiculous. Yes it's before tax, and yes some passive investment vehicle would probably be required to keep up with income growth, but otherwise I don't see how the backlash is justified.
     
  2. neK

    neK Well-Known Member

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    It isn't ridiculous to those on this forum.
    But to others, its just plain insane to think this is possible.
    These are also the people who will rent the properties we buy :D

    If the backlash didn't exist, you wouldn't have a fraction of the wealth you have today ;)
     
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  3. Steven Ryan

    Steven Ryan Well-Known Member

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    Shows how out of touch I am. I thought she was copping it for understating how much should be saved at each milestone.
     
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  4. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    It's actually much easier than you think, especially for Australians.

    Let's say your annual income is $60k so by 30 you should have $60k set aside for your retirement. Then consider our Super schemes. The 9% super would have put $5.4k a year into that account. If you start work at the age of 22 after Uni/Tafe then you have 8 x $5.4k = $43,200.

    That leaves you saving $16,800 out of your own pockets to save or $2100 a year or $40 a week.

    It's pretty doable. That's not factoring growth by the investments your Super is in.

    Then due to the loveliness of compounding growth it will 4 x then 5 x your annual salary.

    The article of course was written in the USA so their pension scheme can be different but for us it's very doable I think.
     
  5. Trainee

    Trainee Well-Known Member

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    10x income isnt enough to retire on. At 5% return your income is cut in half. I thought 20x income is the minimim benchmark?
     
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  6. hobo

    hobo Well-Known Member

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    Wow @Leo2413, a million dollars equity at 30 would be too slow for your kids?

    That's saving $80k a year every year from 18yo (not factoring in compounding, of course, but still).....
     
  7. Sackie

    Sackie Well-Known Member Premium Member

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    @hobo lol i was trying to edit some typos and i screwed up the post so i just deleted it. But yes i feel 1mil by 30 is very attainable and would like my son or daughter to at least have achieved that by 30 as a financial goal.
     
    Last edited: 2nd Nov, 2017
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  8. chylld

    chylld Well-Known Member

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    I enjoy thinking about ways in which this can be achieved.

    For simplicity, let's say someone graduates uni (parents pay edu expenses) with a decent $80k graduate job at 22, and gets 10% payrise every year. They have 8 years to accrue $1m networth.

    Salary alone only adds up to $675k, so simply saving every dollar isn't enough.

    Assuming every dollar can be saved, they would need to find an investment vehicle that returns 12.3% return after fees and taxes. This gets them to $1m networth after 8 years.

    However if they have to pay living expenses, say 30% of disposable income, they then need to find something that returns 23.0%.

    Not impossible with the right mix of property in a booming market and a perfect mix of stocks, but there does seem to be a lot of luck/risk involved.

    Starting a business and getting to $100k annual revenue actually sounds easier :)
     
  9. Sackie

    Sackie Well-Known Member Premium Member

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    Agree its not easy but doable. :) Two quotes come to mind:

    “Shoot for the moon. Even if you miss, you'll land among the stars.” Jim Rohn.

    “Most people fail not because they aim too high and miss, but because they aim too low and hit.” Les brown.
     
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  10. MWI

    MWI Well-Known Member

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    Agree, there are many ways to skin the cat, right? Savings should be just one part (I like 70%/30% rule through out the life time - live on 70% then divide 10% each for capital, investment and giving), OPM should be another, capital for investment could be another, and so on.... Most financial wealth acquired via property is via CG, not just pure ordinary earned income. Many people don't realise there exist other sources of income!!!!
     
  11. Joynz

    Joynz Well-Known Member

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    And, I hope, many young people would like to do as I did - spend a year backpacking the world, then several years working in interesting (but not super well-paid) part time jobs - also over seas.

    I created lots of experiences that I treasure as much as that phantom $million...

    As a parent, you may hope your kids have a $million by 30, but their happiness may lie elsewhere.
     
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  12. Otie

    Otie Well-Known Member

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    I don’t like the giving part. I feel I give enough to the needy welfare recipients in the tax we pay. I do donate small amounts to random charities when I feel moved to though
     
  13. TreeChange@50

    [email protected] Well-Known Member

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    The right business can deliver returns for $1m by 30, but I struggle to see other investment vehicles delivering consistently enough for long enough to hit it unless bank of mum and dad assist with capital to leverage. Very limited chance via savings to my mind.
     
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  14. Xavier

    Xavier Well-Known Member

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    1 good property development can do it! That's my plan anyway!!
     
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  15. chylld

    chylld Well-Known Member

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    I love how PCers have shunned the "1x salary by 30" challenge and instead have taken on @Leo2413's "$1m by 30" challenge :D I always favour positive motivation over negative motivation, but this takes it to another level.

    I can see how that would work for someone starting out and/or breaking bad spending habits, but I prefer to aim to live on only whatever % is required to cover living expenses, and invest the rest. Only profits from those investments can be used for luxury, toys, donations, etc. but most importantly, even more investments.
     
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  16. Fargo

    Fargo Well-Known Member

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    I don't give much money to charity a lot of it is poorly spent. I can contribute much more to charities by investing my money for myself. Then being able to work for an organization for community fund raising. What amounts to about a weeks work raises about 100k for charity and I can have some say on where and what it is spent on.
     
  17. Sackie

    Sackie Well-Known Member Premium Member

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    I
    oops...sowwy....:oops:

    But if you think about it...most ppl on PC are on PC so they don't have to worry about only saving 1x their salary by 30.....most here are after alot more I would be guessing.....i mean look at your car ...does that look like a 1X your salary reality by 30....
     
  18. chylld

    chylld Well-Known Member

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    Without doubt. 1x salary by 30 is a cakewalk, but $1m by 30 is conveniently just ambitious enough (without being overly ambitious) to get some brains ticking.

    Although I did ask one banker friend what strategies he could think of to accrue $1m by 30 and he said "they are all full of crap" :oops:
     
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  19. Sackie

    Sackie Well-Known Member Premium Member

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    OK ill give it a shot.

    If my son asked me how to get to that 1 mil by 30 I am confident I could have a plan for him that would give him a very good shot if he was willing to listen. Would be something (roughly) like this.

    1. Understand that uni degrees will not get most ppl that 1 mil. Uni is not there to get you rich by studying ( as many young and not so young ppl wrongly believe imo). You need to strategically choose a degree that can be completed in a relatively short period of time which allows you to work 24 hour shifts , 7 days a week and also has overtime pay and plenty of it. Also a degree which is geared towards a certain industry which has super high job security. Currently i know of a few degrees that would let you do this.

    2. You need to work your ass off and save. With weekend loading and overtime you can save quite a bit in 1-2 years. You could actually perhaps save in 1 year what most ppl saving hard would be able to save in 2 years.

    3. start small and Invest in real estate around Australia which will allow you to buy, add value and sell or rent and extract equity. You need to be able to actively be building your equity year in, year out and not be relying on CG. There are markets around oz that you can do this. Just need to be totally committed to it.

    4. Keep working your ass off to save those deposits plus let the magic of compounding do its heavy lifting. With a bit of luck (always a good and necessary thing) you'll be be able to do larger deals by 25, perhaps catch a boom or 2 in some markets. By the time you reach 30...i am confident you could have built up alot more than 1X your annual salary.
     
    Last edited: 3rd Nov, 2017
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  20. Tim86

    Tim86 Well-Known Member

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    Nothing wrong with preferences. I think we all prefer to be millionaires. But the damage occurs when we make these things musts. "I must achieve this or that or else Im a failure and its terrible and horrible."

    I've counselled too many kids who want to kill themselves because parents put high expectations on them and tell them they must achieve.
     
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