Rob Berger, a deputy editor at Forbes, retired from his law job at age 49 after saving an amount equal to 25 times his annual expenses.
In his new book “Retire Before Mom and Dad,” Berger emphasizes the relationship between spending and saving.
The number of years it takes to reach financial independence depends, in part, on the share of your income you spend and the share of your income you save — not necessarily the dollar amounts.
To find out how much you should save, you need to know how much you spend every year.
personal finance coverage.
Spending and saving are inversely related.
To that end, the best way to save more is to simply spend less, says Rob Berger, a deputy editor at Forbes, in his new book “Retire Before Mom and Dad.”
Berger, who founded the personal-finance site DoughRoller.net, retired at age 49 from his career as a lawyer. He had socked away an amount equal to 25 years’ worth of his annual expenses — the magic number for reaching financial independence, he writes.
Berger says how much we spend and save act like levers — adjusting them will increase or decrease the time it takes to reach financial freedom. Importantly, income has less to do with it than you might think. Ultimately it depends on the share of income you spend, and by extension, the share of income you save — not necessarily the dollar amounts.
How to calculate your ideal savings rate
To help readers visualize the numbers, Berger created a spreadsheet that calculates how many years you need to save depending on your spending rate and the return rate on your investments.
Let’s say you’re starting with zero savings. If you make $100,000 a year, after taxes, and spend $80,000, that …read more
Source:: Business Insider