Have you ever wondered what your money is used for? Sure, you can search for traces using a household book. But I mean more generally and without much research.
After all, a month is long and there are many ways you can spend your money. Day in, day out. The temptations are often on every street corner. In the form of rolls, coffee, magazines, eating out and so on and so on often in the truest sense of the word.
However, if we break down this expenditure, it becomes clear that the majority are not small sums. No, but go for three significant cost objects that we all have. At least that’s what a blogger now claims to have found out: We waste around 70% of our expenditure on three areas. If we save on it, we could retire early. So let’s take a look below at what could be there.
Housing, food & transportation
As a blogger at Millenial Money now wants to find out, most people spend around 70% of their money on three areas: housing, food and transportation. The target group is actually more of American origin. But no matter: The key messages can be abstracted for our purposes.
Would you have thought that? Well, I probably think so: after all, living, eating and mobility represent three basic needs that we have to satisfy. Whereby living and eating are real basic expenses. Transport, on the other hand, often ensures that we get to work at all and make a living. Still, it is noteworthy that around 70% of spending goes on these three areas. As I said, on average and maybe more so with the Americans. However, a large part of the fixed costs should also be distributed among these areas.
However, the blogger in question now goes so far as to say: If you can reduce your costs here, for example by foregoing a car, a smaller apartment or eating less, you can retire earlier. Well, is that possible? So let’s take a look at a few numbers that definitely come from our room.
Let’s deduct 15% and save & invest it …
As I said, 70% is an ambitious number. However, since these basic needs are expensive and must be met, the potential savings are of course rather small. Let’s just assume, on average, that it is relatively easy to save 15% of this mountain of costs. For example, through more conscious consumption, mobility cuts or even lower housing costs. Whatever the look.
However, every German has recently achieved an average net income of 1,890 euros. If we now count this 15%, which I simply put as a possible saving amount, on this value, we get a savings rate of 283.50 euros. Definitely not a bad value. But let’s see if this could be enough to retire early.
If you only save this value for 30 years, you will save around 102,060 euros, which is definitely remarkable. However, it is not sufficient for early retirement. However, if you regularly invest this amount in ETFs and get an average return of 7% per year, you would make a fortune of 333,540 euros within a period of 30 years. After all, that could be enough to hang up the hammer a few years earlier.
It’s not for nothing that it is such a big cost bearer
Admittedly, spending 70% on housing, food and transportation may seem like a lot. However, it is not for nothing that basic needs that we all have to cover. The savings potential could therefore possibly be lower; anyone who would get around 15% is already doing a lot. Moving to cheaper cities is sometimes not the solution, otherwise mobility costs will increase. In some cases, this is at least a zero-sum game.
However, if you manage to save and invest 15% every month, you can achieve a lot. Especially if you rely on standard returns and funds such as ETFs. Is that early retirement? Matter of opinion. But about 333,000 euros with an average income and a savings rate of 15% is definitely a very, very solid start.
The post 70% of your money for these three payers? Save & retire early and get rich! appeared first on The Motley Fool Germany.
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