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
Zach is the author behind Four Pillar Freedom, a blog that teaches you how to build wealth and gain freedom in life.
Zach's favorite free financial tool he's been using since 2015 to manage his net worth is Personal Capital. Each month he uses their free Investment Checkup tool and Retirement Planner to track his investments and ensure that he's on the fast track to financial freedom.
Although the bulk of his net worth is invested in index funds, his favorite place to invest in individual stocks is M1 Finance, a site that allows you to build a custom portfolio of stocks for free.
His favorite way to save money each month on his recurring bills is by using Trim, a free financial app that negotiates lower cable, internet, and phone bills with any provider on your behalf.
His favorite micro-investing app is Acorns, a free financial app that takes just 5 minutes to set up and allows you to invest your spare change in a diversified portfolio.
His favorite place to find new personal finance articles to read is Collecting Wisdom, a site that collects the best personal finance articles floating around the web on a daily basis.
Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.