The Monthly Savings Grid

monthlySavingsGrid2

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),  with a 7% interest rate you will cross your mark of $565,000 in 42 years:

monthlySavingsExample

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.

I strongly suggest using tools like Personal Capital to track your finances. Personal Capital is a financial tracking tool I have personally been using since 2015. It lets you see all your 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 free.


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8 Replies to “The Monthly Savings Grid”

  1. Our savings rate hovers around 40 – 50% right now, but I know it’ll be even better once we’re able to eliminate our mortgage. 🙂 This also assumes that you aren’t paying off debt and all of our savings are going directly into *savings* or investments. So if you have debt, you’re paused before you can really use this chart to calculate your FIRE date.

  2. Awesome grid! What if you don’t start at zero. How can i use this and take my existing savings/retirement funds and calculate from there as the baseline?

  3. The grid is assuming 7% return on investment. If the updated grid is able to recalculate numbers based on increment of every 0.5% interest rate, it will be helpful to understand what type of investment pattern one can choose amongst 4-6 different portfolios.

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