Sunday, 7 July 2013

$100K by the age of 30?

Today the Straits Times has an article showing that it is possible to save $100k with roughly 6 years of work.

The article showed that it is possible with a starting salary of $3,050, 15 months salary a year (3 months bonus), pay rise 4.5% a year and saving rate of 50% your annual pay.

For curiosity's sake, I ran a calculation with the following assumptions:
1. Starting pay $2,550,
2. 1.5 months bonus every year,
3. 4% pay increment every year,
4. Saving rate 50% of pay,
5. 40% of saving at bank generating 1% interest,
6. 60% of saving on investments with 4% returns (e.g. dividends from stocks).

AgeMonthly PayTakeHome PayAnnual PaySave 50%40% at bank60% investTotal Savings

Therefore, we can just about making $100K even with my above assumptions.

However, great sacrifices must be made:
1. Work near your home, so as to minimize transportation cost.
2. Absolutely "No-no" owning a car.
3. Pack your own lunch to office, minimize eating out.
4. Do not indulge in expensive hobbies.
5. No branded or luxurious possessions.
6. No housing, wedding, honeymoon, children, medical, etc, commitments.

Besides these massive sacrifices, also:
1. No market crash during these six years, 
2. No fatal investment mistake.

So, do we want delayed gratification or eating our marshmallow immediately?

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