# Find Out What Age You Can Retire With This Equation

If you're a dummy when it comes to savings, join my club. From the moment I got my first paycheck at 15, I was liberated with this newly-found financial freedom. I bought a surfboard I still to this day have never used and I raided Target's Disney DVD range to add to my own dusty collection. My first few paychecks never did last very long.

While I like to think I've come a long way since 15, my relationship with money is still a little dicey. So, will it ever be possible for someone with my bad habits to save enough to retire? Apparently, there's a way to understand the concept more simply. Let me impart that knowledge onto you.

### If Cash Is Your Only Savings Strategy, You're Losing Money

Investing isn't as hard (or as risky) as it seems, but it's a lot of information and it does take some time to learn, which turns many people off of it altogether. However, if you've been putting it off and you have a hefty amount of cash savings, consider the problem of inflation.

The maths equation, brought to our attention by Mr. Money Mustache, is extremely simple to grasp - particularly for a money dummy like yours truly.

Even if mathematics isn't your strong suit, the primary takeaway is that your 'savings rate' (i.e. how much you're saving) can be determined by your total income minus your living expenses. It seems so obvious, but say you're earning \$1000 each week and pure living expenses equate to around \$400 - and that's all you spend - your savings rate would be 60 per cent.

The bigger your savings rate, the quicker you can retire. Thankfully, you can make a retirement calculator, like Networthify, do all the hard work for you when it comes to the hard numbers.

After plotting my numbers in and seeing the results, I am now placing a moratorium on my online shopping tendencies.

Incidentally, while it seems rational that having a bigger income equals bigger savings, this isn't the full story. As Mr. Money Mustache explains, cutting your spending rate is much more powerful than increasing your income, as it builds your overall monthly savings and "permanently decreases the amount you'll need every month for the rest of your life."

Now, I just need to take these financial insights into my daily spending habits.

The Reserve Bank of Australia (RBA) is currently floating some bold ideas to get the economy back on track - including reducing interest rates into negative territory. Instead of gaining interest on the money in your bank account, this means you would actually lose money. So what can you do about it?

This story has been updated since its original publication.

Its a pretty simple equation. Spend less than you earn. Bigger the gap, the more you save. The more you save, the faster you get rich. Faster you get rich, the sooner you can retire. Its the most common thing rich people say when asked how they got there - spend as little of their money as they can.

It gets easier as you go through those steps, with the hardest part seeing actual progress. If you save \$200, it doesnt look like much. If you do it each week for a year, you have \$10,000. At some point, you see that benefit and start to put more and more away. Amazon doesnt look as enticing then. Basically, you get into a routine.

You'd be surprised how quickly it all falls into place once you get into that routine as well. Good budget leads to good savings, which leads to good capital to invest, and then good assets. Hardest part is getting to a position you can live with, and still save enough to be relevant.

true but not quite

if you earn 200k and spend 100k you are 100k in front (round figures for the argument sake)
if you earn 100k and spend 50k you are 50k in front
if you earn 50k and spend 25k ... 25k

in 10 years 100*10=1m
.... 500k
...250k

assuming you can reduce you spend when you retire you are better off with the 1st option

moral of the story ... earn more / spend less / evaluation your priorities when you retire / and accept that in some cases you will have to mule till government approved ages and be on a minimum pension

life can be a b*** and its not always your fault

Thanks for the late reply :)

Doesnt change what I said, my friend. Spend less, save more is the basic formula. Find that relevant point where you're comfy in how you live, and you have an idea how much you can save. Its that point which is different for everyone but it doesnt need to be much. It comes down to the individuals choices, and how they want to live. Which is fine.

And obviously, the more you earn the more you should be able to save, but its not impossible. I know people on \$200k that will never own their own place, while others on far far less save easily.

FYI, I retired at 48. I didnt have lofty goals, I just wanted to own the roof over my head before I retired. The world conspired to help that happen in 12 years. I've never had anything handed to me, but my life is proof that life can be a b***h, and that its not always your fault, and you can still make it work.

Not a sob story, just my story, but I've gotten to this point by myself. I was also more \$50k than \$200k, with \$50k being my income when I first bought my property. 2007 isnt that long ago that it was a lot of money either. Hardest parts were changing my habits to prove I could afford the repayments, and walking into the mortgage broker.

End of the day, if you're on \$50k it should be harder than if you're on \$200k. Thats a no brainer. But the mentality is the same and its not impossible, just mental. Spend less so you can save. Yet some on \$200k will never have assets, because they have such bad habits. Until they change, that wont.