My last post which included my Budget showed that my target savings figure is £978.62. This to me feels like a large sum of money. I was brought up having most things I wanted. Toys, computers, clothes and all that goes with being a child and young adult. I was spoilt. But whilst I never wanted for much, my family was never cash rich. Disposable income was negative and debt eventually crippled my parents. This mean’t that when they separated and sold their home, the 600% gain in house value was used to settle all their debts. My family would have never seen the kind of disposable income I’m going to achieve each month, so feels almost intimidating to me, like I have a responsibility with this kind of spare cash.
I promise that I will use it wisely, or try my best to.
In What I am Dreaming Of, I had already worked out that I need £441,377.20 to achieve Financial Independence. This is my end target, my ultimate goal, my Golden Pot. At the moment I have £8,164.73 invested in either pension or my newly acquired Investment ISA. I was a slow starter on the pension front so it’s a bit disappointing, but there’s no point in crying over spilt defined contributions. With that knocked off, it leaves me with a shortfall of £433,212.47.
So, how do I get there?
My pension contributions at 8% are £293.33 per month, and my employer kindly matches this for me spending most of my time here, giving a total pension payment of £586.67.
Added to my monthly target savings figure from my budget, this gives me £1,565.28 towards my Freedom Fund each month. This is a nice sum of 54.18% of my take home pay. (Unsure of the relevance of this percentage given that it’s not all my contributions, some is pre-tax and I’m comparing it to post-tax payments, but it does sound nice)
Excel can be super nifty at times, and this instance is no exception. Using the NPER function, Excel can work out how long it’s going to take to reach a certain taget figure if you give it the value of the recurring investments and an assumed rate of growth of these investments. There is a formula for this and I could do it long hand but I’m all about efficiency these days. Assuming my figures about including pension and a growth rate of 4% per annum, Computer Says:
Tadah! 196.42 months! Which is 16.37 years. If I am now (roughly) 30.41 years old that would take me to 46.77 years old and retiring. Not too bad! A much better shout than the 70 years old the retirement age will probably be by the time I reached that age.
Whilst perusing a business website, I saw this quote attributed to Ellen Bennet;
The path in front of you is rarely a straight line. It’s full of bumps … Embrace the bumps in the road.