How 1% effects your retirement plan?



Would you prefer to drink coffee or work two years less? 
Would you prefer to watch a cinema movie each month or work two years less?

1% extra saving is 2 years early retirement.  


Even if we can max out on credit leverage with risk-free or negative interest rate, savings can never be out of fashion in personal finance, simply because that's the only way to accumulate wealth. 

But how much should we save? Could we ever save too much?


Saving to retire is hard - according to the 4 percent rule, a person will need 25x (times) of your annual expenses to generate enough income for retirement and at 90% savings, it takes 19 years to achieve 25 times income!?

But hey, if you are saving 90% of your income that means you can survive with only 10% of your income. So you don't need to work for 25x of your income, just 2.5x. That means you can actually "walk-away from corporate" in 2 years!

Realistically, most of us could only save about 20-25% of our income and that will means we need to work between the typical period of 27 to 30 years. Yes, the system is designed to keep us at work - painful toil in life.  But if you save anything less - you will end up never ready for retirement. :p 

I know that's some advanced algebra math at work here.  If you are confused on what I am saying, just remember this: 

1% extra saving is 2 years early retirement. 

If your take home pay is RM3000, 1% is RM30
If your take home pay is RM5000, 1% is RM50
If your take home pay is RM10000, 1% is RM100

That means the extra RM5 for sweet drinks when you aren't thirsty, extra RM10 to snack at the cinema, extra RM50 because your t-shirt looks old - is costing you two years of work. Would you prefer to buy a shirt or work 2 years less?

Remember this before you take out your wallet and buy something. 


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