I’m (insert age) how much should I have in the bank by now?
One of the problems with the financial world is that there are no benchmarks for people to take a look at and compare themselves to. People may feel a little ashamed that they spend every dollar they earn or happy that they save a little here and there but without any meaningful target they don’t really get to have that “uhhhhh what the hell am I doing?” moment or the “I’m killing it” moment either.
Some arbitrary numbers from a well funded US study…..
At age 35, you should have saved an amount equal to your annual salary.
At age 45, you should have saved three times your annual salary.
At 55, you should have saved five times your salary.
What good is money in the bank without a purpose though? If you had $100,000 extra in the bank, would you actually feel any different (hint, the answer is absolutely not!). The real driving force behind why someone has more or less money in the bank and assets/stuff than you is because they have waaaaaaaaaaaay different ideas as to what they want and why they want it.
So the first step to being happy with your financial situation isn’t how much should I have by now or what should I invest in, it’s asking “what do I want?”…..what’s my money going to do for me, not from an investment sense but from a results sense. Passive income is a common goal I hear, a conversation may go along these lines – I would like to create a passive income stream using investments. Why? So I can retire early. Why? So I can travel more often. Why? Because it excites me to experience different cultures and learn about other customs. Brilliant, very motivating. This conversation put a different way might tell you why one person commits to this plan and another doesn’t – I would like to create a passive income stream using investments. Why? So I can work less. Why? Because my parents and friends think it’s a good idea and I don’t really like my job that much. Not so motivating over the long term I would suggest.
Put another way, If you absolutely had to save 60% of your income for a few months (or longer) to fund an organ transplant for a loved one, could you do it? OF COURSE! If you had to save 60% of your income for a few months just to have it in the bank, could you do it? My guess is probably not. You would be more likely to go for that extra Saturday night dinner if it’s a few bucks on the line instead of a new kidney for uncle Alf!
Two points to consider…
Never compare yourself to anyone else. We all have different ideas about what and why we want things.
Forget about the dollars and cents, think about what you want and why, then go looking for financial solutions that fit your plan. If you can’t do or have it all then prioritise in order of your most important to least important result and get cracking.
It doesn't really matter “how much you have”, the only thing that really matters is the result you want to achieve and the reasons behind why you want to achieve it.