One time after a personal finance discussion with a friend I think I may have inadvertently shared too much about how much I saved or how my progress was towards retirement. I'm guessing that since it was a goal that my friend had never given much serious thought to they just immediately thought that someone my age should be out "enjoying life and spending my money" not hiding it away for a rainy day. They told me, "Whoever dies with the most, loses the most." Right then I knew the conversation was over so I let it drop, but even months later I still think about that comment.
The first thing about it is that the viewpoint of that comment assumes that money is the most important thing in life. That if you end your life with $0 then you played it correctly. I can't imagine being 90 years old and having $30,000 left in my savings and wondering if I would outlive the money I had left.
But this also made me think of what is my plan? Why am I saving? What's the rush to be financially independent years/decades before most other people? It took a long time to find these questions but the answer to me was simple:
I'm buying my time.
The way that I view it, I don't own my time, and that is the most important thing to me. Money is a way for me to acquire my own time. Right now, my time has to be spent making money so that when I do take vacations or want to do something I can afford to take that time off of work. Once I reach financial independence, I will have successfully bought my time for a price I deemed fair, I am then free to spend my time on whatever I want to do with it. If I die with a lot of extra money and a few extra decades of being able to choose what I wanted to do, instead of working at a job. Then I think I'd be happy with that.
This prompted me to do some math to figure out how much my time was worth, how much I needed to save, and how much I had saved. I have a couple of examples of how much time is worth below since I didn't want to give exact specifics on how much I spend or make. I also expanded this to show how much you would need to save to get 25 years of expenses saved since many places seem to use this as a standard for a projected retirement number where you should not run out of money.
|Taxes (15% tax rate)||
|Annual Expenses With Taxes||
|Work Hours in a Year||
|Cost of 1 Hour of time||
|25 Years Total||
Scenario 2: $3,000 per month or $36,000 per year (after taxes)
|Taxes (15% tax rate)|
|Annual Expenses With Taxes|
|Work Hours in a Year|
|Cost of 1 Hour of time|
|25 Years Total||
I think it's fun to know how much an hour of my time will cost me. Knowing that saving $2,000 equals over 3 weeks (16.6 business days @ $15/hour) of retirement seems like a great measuring stick to me.
As you can see the difference between $2,000 and $3,000 per month in expenses can make a huge difference in how much you need to save. I also gave a large buffer for taxes, since your effective tax rate should be lower than the 15% tax bracket shown here. Also, if you have any deductions or money saved in tax exempt accounts such as a Roth IRA then you won't have to pay any taxes on that money as it comes out. So you should have a much lower tax rate. These numbers can easily be adjusted by not having a mortgage or rent in retirement or even working a part time job as a tennis instructor for fun.
I'm not exactly sure how much time I've saved at this point because these variables can change things but I believe I'm about 35% of my way towards owning all of my time (or about 8-9 years worth of my time saved). This is a hard thing for me to gauge since while I do have a mortgage now, I have a feeling I could pay off my house in the future which would lower my monthly expenses. However, I don't actually see myself living in my current house for the rest of my life, so that will be a big change at some point.
My guess is that when I near financial independence I'll have the "one more year" syndrome because I'd rather work a little longer at a higher paying job for the peace of mind it will probably offer for not running out of money.
What do you save for? What is important to you? Being able to buy gadgets? Owning your time?