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Why You Should Start Saving For Retirement in Your Twenties

30th April 2019

saving for retirement twenties

You want to be saving for your retirement in your twenties.

Why? Many of us think our country will take care of us when we reach old age. But what if we keep changing country? What if we don’t spend more than 10 years in one place? What if your country doesn’t give you enough to live on? It does suck to be poor when you’re young, but it sucks even more when you’re old. We’re not saying sacrifice all your money now so you can retire comfortably – the good news is that if you start in your twenties, you’ll only have to sacrifice a little bit for a comfortable retirement. 🎉

You have one huge asset that can be pretty much a game changer: time.

Here are 3 reasons now is the best time to get started:

1. Your country might not take care of you

The amount you get in your pension depends a lot from country to country. It also depends on how many years you’ve worked and how much you’ve earned in that country. In Spain, depending on how much you’ve earned over the years, your retirement will earn a low 155€ per week, or go to the maximum of 535€ per week. For France, the minimum is 130€ per week while the maximum is 340€ per week. In Germany there is no minimum or maximum since workers pension insurance is compulsory. And in the UK it is a pretty low £125-£165 per week – although retirees have quite a few subsidised benefits.

So as you can see, most of these numbers aren’t very high. The maximum pension in Spain is 2,140€ per month, which yes, is actually pretty good. But you have to work 15 years in Spain to get 50% of that pension, and work 35 years and a half in Spain to earn the full 100%.

For us people who plan on working in several countries and on digital nomading for a while, 35 years working in the same country seems like a bit much. So who’s going to pay for your pension if you change country every 7 years? Yourself. And that’s why you gotta start early.

saving for retirement twenties
you still digital nomading in your 60s

 

2. You have TIME = compound interest

But it’s all good, because if you have time on your side then you don’t need to put away a lot of money. With a simple 15% of your income, you’re doing well. 😛

Let’s steal an example from Tony Robbins’ book ‘Unshakeable’ to illustrate this:

Two friends, Joe and Bob, decide to invest $300 a month. Joe gets started at age 19, keeps going for eight years, and then stops adding to this pot at age 27. In all, he’s saved a total of $28,000.

Joe’s money then compounds at a rate of 10% a year (which is roughly the historic return of the US stock market over the last century). By the time he retires at 65, how much does he have? The answer: $1,863,287. In other words, that modest investment of $28,800 has grown to nearly two million bucks! Pretty stunning, huh? (yes it is, Tony).

His friend Bob gets off to a slower start. He begins investing exactly the same amount – $300 a month – but doesn’t get started until age 27. Still he’s a disciplined guy, and he keeps investing $300 every month until he’s 65 – a period of 39 years. His money also compounds at 10% a year. The result? When he retires at 65, he’s sitting on a nest egg of $1,589,733.

Let’s think about this for a moment. Bob invested a total of $140,000, almost five times more than the $28,800 that Joe invested. Yet Joe has ended up with an extra $273,554. That’s right: Joe ends up richer than Bob, despite the fact that he never invested a dime after the age of 27!

 

Although Tony’s numbers are a little optimistic with a 10% rate of return, the concepts remain the same. By investing early and allowing compound interest to do it’s trick, you don’t need to put in that much, all you need to do is start early. This is because by the time Joe is 53, the compound interest is adding over $60,000 per year to his balance. And by the time he’s 60, he’s adding $100,000 per year. And if he had continued investing $300 a month till he was 65..? It would be an astounding $3,453,020!

If $300 sounds like too much for you, then simply adapt. Could you put away $100? Use some of these compound interest calculators to see how much you’d need to save in order to have a comfortable retirement. A good starting point is 15% of your income. For those of us who are right at the beginning and focusing on skill-building and exploring, even 100€ is quite a lot to put away (including me!), well then start with 50€. But the important thing is to start.

Even if I put 50€ away every month from the age of 20 till the age of 65, with a 10% interest rate I will get €454,367.15 at the age of 65. Imagine if it was 100€. Yes, it would be 908,734.29€. Not bad, huh?

For more info on investing check out these posts:

  • The Power of Compound Interest: Get Rich with Just £100 a Month
  • 6 Investing Myths Debunked

To get started with investing, it’s not so easy to give advice because each strategy varies from country to country. But as a general rule you want to be investing in global index funds/ETFs using a tax advantaged account. Here are some great resources to learn more:

  • Reddit /investing
  • WTF are Index Funds, ETFs and Mutual Funds
  • FI Europe Facebook Group

 

3. Your future self will thank you

Many people don’t understand the concept of saving now for the future because they ask

‘What’s the point in having all the money when I’m in my 60s when I won’t need it? I’m better off using it now’.

For this reason I say save 15% and not 50%. As we saw before, thanks to having time on your side you don’t need to sacrifice a lot to have a comfortable retirement. And this 15% is sacred – I would not use the money you’re saving for retirement to buy a house or to pay for a huge expense. This 15% is yours, for your future self. And you will thank yourself for having that money when you’re older.

Right now 15% won’t be much. But if you take the time when you’re younger to build career capital and find a job or activity of best personal fit, you’ll be making money. You’ll make most of your money in your 40s to 50s, and that’s when your 15% will make a real impact. 👌

Nowhere are we saying sacrifice your current money to live like a king in your 60s. We’re saying sacrifice a little bit of money to live like a comfortable, normal 65 year old (and even retire early if that’s what you’re interested in).

saving for retirement twenties
plant those money trees now so you’re comfortable in your 60s 🌴

These are 3 reasons why saving for retirement in your twenties can take you very far. Most times, retirement is the last thing on your mind when you’re young, but really it all depends on what you value and want later in life. If you are financially educated and value your freedom, you know that you’d rather trust yourself with your money rather than the government. If you want freedom, now is the time to start. 🎉🎉

 

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Financially Mint is on another break! ☕ I will Financially Mint is on another break! ☕

I will be living in Kuala Lumpur, Malaysia for the next few months, and then hopefully heading to Australia. 
My plans for the next year:

I'm putting the career testing theory into practice. My next career test is working for an NGO here in Kuala Lumpur. This week will be my first week. I will be working with sex trafficking survivors and I've also been asked to do some financial education presentations to help the staff.

After that the plan is to move to Melbourne, Australia, and do my next career test: consulting. If that doesn't work out I will try another career test which may be more achievable: business development in a startup. Thanks to the amazing career books that I've read, I'm pretty confident I can get an interesting job. We'll see how it rolls. 🏀

How am I funding this? I'm very excited to say that I've managed to grow my part-time freelancing income to a full-time income that can sustain me in South East Asia (I would need to work full-time in Europe). I'm calling myself a 'Freelance FinTech Writer'. Rent is crazy cheap (like 300€/month) and it's literally cheaper to eat out than cook. I'm still able to save 15% of my income. 🎉🎉 The increase in clients and pay has been thanks to all the effort I put into Financially Mint, and to some crazy cold emailing and networking in the past few months. 
After some thought, I concluded that learning mark-up language (HTML + CSS) was a more efficient use of my time than writing blog posts and working on FM... so I am now taking a break to learn some basic coding and decide what to do next.

I will still be podcasting and taking part in the FI community on Twitter and everywhere else... so I'll still be seeing you around 😉

To our success 🎉🎉
Only 30% of jobs are posted online. 🙄 Let's sa Only 30% of jobs are posted online. 🙄

Let's say you've got a list of career paths to test. You've figured out a direction, you know which sector you want to work in and you've got some cool companies in mind.

But then what? How do you get an internship in the company you really want to work for? How do you get a job in that specific NGO? How do you get them to notice you? 🤔

In FM's latest post I share a strategy that I am still testing but seems to work - copied from a book titled 'Designing your Life' by Bill Burnett and Dave Evans:

The strategy: Conducting 'Life Design' Interviews. .
A Life Design Interview is basically meeting the person that has your 'dream career' for coffee. ☕

You find someone who is working at the company you want to work for, in the sector you want to work for or simply has a position you're interested in, and you reach out to them (LinkedIn helps). You ask about their story, their position, how they got to where they are and their advice to people starting out. 
This is what I've been doing for the past month in Edinburgh, and of the 40 people I contacted, I met 8 of them for coffee, my goal to simply learn about their story.

With an added bonus: Trust. ✅

Not only did I learn stuff about working in a startup, or as a content writer or working in an NGO, but I also built a trusted connection. It's those connections that help you find the hidden jobs, the dream careers and the best opportunities.

Check out FM's latest post for a proper run down on Life Design interviews. 💪 (Last week we organised the FI Europe podcast retreat! An amazing 4 days doing speeches, masterminds, debates, boat trips, beach and surfing. Post on this coming soon 🔥)
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#financiallymint #budget #budgeting #personalfinance #savinghacks #makemoney #savemoney #money #shoestringbudget #moneyhacks #moneysavinghacks #financialeducation #financialfreedom #adulting #savingtricks #earnmoney #lifeadvice #counsel #careeradvice #retirement #investing #careerbuilding #skillbuilding #career #selfimprovement #inspiring #fieurope #lifedesign #interviews
Investing in yourself now will return bucket loads Investing in yourself now will return bucket loads in the future. 🔮

I talk a lot about this on Financially Mint - how taking the time to build career capital and explore career paths will allow you to find a career of best personal fit, which will then make you the money you need.

But it is true that I am personally at the very start of this journey, and so can't offer many examples of this working. 🤷‍♀️ Well today, this changes as I interview the Financial Gladiator, who did exactly that.

He went to university to study business in Poland, and finished his masters in Australia. In the meantime, he was doing internships, making connections, building skills and beefing up his portfolio. 
He says it himself: ' I always looked to add experience and skills to my repertoire rather than dollars' 💸.
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7 internships later in several different countries and industries and a lot of hustling, moving around and learning about what career fitted him best, FG ended up in a job that paid him a six figure salary. This kept on snowballing, and in his early thirties he hit a salary of over $500,000. .
That goes to show how much investing in yourself can return in the future.
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$500,000 annual salary doesn't need to be your goal, but it still goes to show that you'll make the bulk of your money after investing in your own career. 📈

A great interview filled with actionable career advice and FG's complete story, check out FM's latest blog post! (Edinburgh castle 🔥)
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#financiallymint #budget #budgeting #personalfinance #savinghacks #makemoney #savemoney #money #studentmoney #studenthacks #studentlife #shoestringbudget #moneyhacks #moneysavinghacks #financialeducation #financialfreedom #adulting #savingtricks #earnmoney #lifeadvice #counsel #careeradvice #retirement #investing #careerbuilding #skillbuilding #career #selfimprovement #inspiring #work
Most of us don't know what we want to do in our tw Most of us don't know what we want to do in our twenties 🤷‍♀️. And that's absolutely normal.

But that's why we don't want to be committing to one thing - who know what you might want to do in 5 years? 🧐

Instead of committing, why not be exploring, investigating and testing career paths. But how can you do this cleverly without being a typical 'millennial-career-hopper'? By building career capital at the same time.

This means that every career test you do will help you build skills, connections and a more solid portfolio. If you have no idea where to start, here are some examples of jobs/activities that can help you build career capital:

1. Working for a growing organisation with a growing performance: this could be consulting, a startup - anywhere with a good mentor and team 👨‍👩‍👧‍👦
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2. Graduate studies - for those who want to work in research, a think tank, etc.
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3. Building a valuable and transferable skill - skills such as writing, programming, designing, data science, etc will always be useful in the future 💻
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4. Creating content - you don't always need a shiny piece of paper or a medal to show that you've done something. Creating your own thing can be just as useful.
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And much more amazing career advice... in FM's latest blog post 🤓
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(I’m running out of pictures to post so here’s one of a beautiful evening in Edinburgh) .
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#financiallymint #budget #budgeting #personalfinance #savinghacks #makemoney #savemoney #money #studentmoney #studenthacks #studentlife #shoestringbudget #moneyhacks #moneysavinghacks #financialeducation #financialfreedom #adulting #savingtricks #earnmoney #lifeadvice #counsel #careeradvice #retirement #investing #peoplemanagement #skillbuilding #career #selfimprovement #inspiring #work
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