The other day I was surprised when I read that more than 1,000 people a month search “how much money you have to have saved at age 40?” … literally these words.
This article will give you my opinion on how much money you should have saved up to and beyond age 40. While I will give you the exact figures, it is impossible to generalize. What really matters is the path you are following and the steps you are taking to save. You are saving; that will be what will really mark your economic well-being.
Statistics on Saving are Grim
The average savings of someone living in America is 7.9% of their income, but 45% of the American population does not save and has no financial safety net to face unforeseen events. With some families saving between 30% and 50% of their salary, it is clear that there are many others that save 0% to have an average of only 7.9%. Given these statistics, it is logical why there are so many people looking for an amount they should save by 40.
When someone starts working, he enters the rat race headfirst, and usually, when he gets close to 30-35, he begins to think that it is time to save. It is at that moment when he looks for how much to save at 40, and he realizes that he is late.
How much money should be saved according to age? There are many theories, but there is a formula I found simple enough to highlight. According to the formula prepared by finance expert Kimmie Green, at 40 years old, someone should have saved the equivalent of 3 times their annual salary.
That is, if your annual salary is $20,000, then you should have saved $60,000. According to Green, at 30, you should have saved your annual salary, and then you should add that amount to your account every five years. Thus, at 40, you will have three times your salary, at 50, you will have five times your salary, and at 65, you will have eight times your salary. To achieve that savings without investing your money, you must save 20% of your annual salary.
However, the amount of money you have saved at age 40, or any other age, is not the only important thing; what you do with that savings is also very important. Saving in the long term without doing anything with that money is unwise because inflation causes your money to lose half its value every 25 years or so.
Important to Note
- What really matters is not the amount you have but the freedom that it gives you.
- Having money gives you freedom and peace of mind, and that is priceless.
- Do not try to only follow formulas that tell you how much money you must have depending on your age.
- Make a plan, control your finances, and save and invest money to be freer every day.
- Follow your own path, and you will accomplish your own goals.
Someone who does not have a financial safety net to face unforeseen events is someone who lives uneasily; someone who lives wishing that nothing will go wrong.
All in All
The reason people save money for their 40’s is because of unforeseen circumstances. The future is unseen and unpredictable. The only way to save ourselves from worst-case scenarios is to start saving today. It is better to be prepared for the unknown than to be swept away by it. Save money for the peace of mind and body; save for yourself.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.