So, during my journey to early retirement, we talked about tracking spending, earning extra income, reduce your spending and calculate how much does your life worth. But amazingly, there is only one number that you need to pay attention to if you want to retire early (as soon as immediately!!!).
What is the magical number am I talking about here? That is your saving rate, which means the percentage of your income you are saving up. Before we talk about how many percent you should be saving, let start with some basic first.
Simple Math of Emergency Fund
If you are saving 10% of your income (no many people saving this much), you will need to work 9 years before you can take one year off (either voluntarily or not). If you raise your saving rate to 20%, you only need 4 years of work to take one year off. If you are really frugal and save 75% of your salary, one year of work will give you 3 years of off time.
By now, you might be thinking “chey! Another nagging blog post asking me to save as much as I can to enjoy delayed gratification later, I also knew that!” Interestingly no, that is not my suggestion here. Retirement planning should be unique to different individual and only you yourself know what is important to you and what is the price are you willing to pay for it (in term of money or time).
You can easily get all the hard, cold calculation on the web telling you how many years you will have to work before retire if you are having certain saving rate (one of them is here, you will need to scroll down to see the table).
What I am proposing to you is ignore those numbers first, put aside all the calculation, and look at these few area of your life which I think is more important to you right now:
Job (The activity you do to get paid)
I will assume most of you will be still working for money and your job is taking up most of your waking time. The question you need to ask yourself when you embark this journey to early retirement is “Am I running away from something (your job) I hate or am I fighting toward something I want?” I hope you can see the difference here.
Although the result of both motivation might be the same (retirement) but the end point can be quite different. In order to determine your motivation, you can play this “now what” game.
It is very simple, image you have now retired, ask yourself the question “now what?”. If you can come up with more than one answer and they are not consists of “I finally don’t have to do XXXX now” or “Finally I can quit XXXX now”, you are doing fine.
Early retirement is a gift, a gift you can give to yourself if you work really hard toward it. But don’t forget you are not alone along the journey, your parent is with you, you might find a partner, raise a baby.
Depends on your value, it might be perfectly ok for you to delay your retirement because you want to give your children the best (and most of the time also the most expensive) education he/she can get.
You are the center of all this, of course you need to consider you own needs and wants. You will have to fulfill your own needs and wants before you can provide for someone you love, this is not selfish.
Life is unpredictable, although you can retire under 3 years if you save 90% of your income but important point is will you enjoy the journey along the way? Will 17 years of working and 50% saving rate sound more reasonable to you?