Behold. The Monthly Savings Grid.
This grid shows how many years it will take you to reach financial independence based on your after tax annual income and how much you save per month.
This grid assumes you start with a net worth of $0 and that your savings are invested and will grow at a rate of 7% annually.
Here’s how to interpret this grid
If you make $25,000 per year (after taxes) and you save $200 per month, you will be financially independent in 42 years.
Here’s the math behind it:
If you make $25,000 per year and save $200 per month, this means you’re saving $2,400 per year and spending $22,600 per year. You need 25 times your annual spending to be financially independent, which is 25 * 22,600 = $565,000.
By saving and investing $2,400 per year ($200 each month) at a 7% annual rate of return you will cross your mark of $565,000 in 42 years:
Some Interesting Observations
- Increasing monthly savings from $200 to $400 at every income level allows you to reach financial independence at least ten years sooner.
- The light green boxes represent about a 50% savings rate while the dark green boxes are closer to a 65 – 80% savings rate.
- Someone who starts working in their early 20’s and makes $50k per year (after taxes) can retire in their late forties by saving and investing just $1,000 per month.
- That same person who starts working in their early 20’s and makes $50k per year (after taxes) can retire in their mid to late thirties by saving and investing $2,000 per month.
Related: The Million Dollar Age Grid
I strongly suggest using tools like Personal Capital to track your finances. Personal Capital is a free financial tool I have been using since 2015 to track my investments, income, and expenses all in one place online. It even offers investment advice and recommendations. It’s easy to set up, easy to use, and best of all it’s completely free.
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