How To Save $830,000. Will It Buy You Financial Freedom?
A recent NAB survey reveals most Aussie’s believe $830,000 is their ‘magic’ number to be financially free.
Not surprising, the amount fluctuated dramatically depending on where survey respondents lived, their income and family status. While the average NSW resident’s said they’d feel financially free with 1 million in the bank, Tasmanians pegged $337,000 as enough.
What does financial freedom mean to you?
Where you live and how much you earn aside, your personal ‘magic number’ also depends on what financial freedom looks like to you.
If your goal is to become financially free, the first step is defining what it actually means for you. Once you’re clear on that, you can figure out what needs to be done to get there.
Here’s a couple of different takes on what financial freedom might look like for you.
Living Comfortably
Financial freedom for some may mean having enough money to fund a comfortable lifestyle without money stress. Mortgage and bills paid, an emergency fund, a growing investment portfolio plus lifestyle choices like overseas trips and eating out regularly.
Being debt free
Maybe your idea of financial freedom is being debt free. No credit card statements rolling in each month or hefty mortgage repayments. With all debt paid off, you can channel most of your income to other financial or lifestyle priorities, like investing or taking 3 months off every year to travel.
Time well spent
Some of us believe financial freedom is actually more about time than money. Spending less time working and more time with family or on passion projects, but still living financially stress-free because all expenses and saving goals can be met.
Freedom to tread your own path
The digital nomad lifestyle and super early retirement goals have exploded in recent years. Saving enough to retire in your 40’s or running a business from a laptop at home, or poolside in Bali could be how financial freedom looks for you.
The choice to do a job you love
The freedom to work in lower paying career you love instead of a job you’re miserable in and still have the financial means to cover all living expenses without money worries.
Whatever your definition is, investing and the magic of compound interest will help you get there faster.
How to save $830,000
Powerball dreams die hard but you’re better off committing to long-term saving consistency and patience when it comes to hitting a million in the bank.
Let’s assume you want to save $830,000 by the time you are 65 years old. This is how much you may need to save in your bank account each day, month or year.
Note: Calculations are overly simplistic and use an annual rate of return of 1.50%, and excludes fees and penalty rates Past performance should not be taken as an indicator of future performance.
That’s a lot of money to save each day! The amount you need to sock away each payday depends heavily on how early you start, so the sooner you begin putting your money to work, the better.
Now if you apply a savings discipline to investing, this is how much you may need to save in a Growth FirstStep portfolio each day, month or year.
Note: Calculations are overly simplistic and use an annual rate of return of 6.25%, and includes FirstStep’s Account Fee of 0.275% and excludes Usual Expenses, and Spread. Excludes minimum Account Fee. Past performance should not be taken as an indicator of future performance.
Suddenly financial freedom seems achievable. This simple calculation demonstrates how every cent counts when it comes to investing.
No matter what financial freedom looks like to you, breaking your ultimate savings goal down into small, manageable steps will help you stay focused for the long run. Investing is a marathon, not a sprint and we hope our calculations here have inspired you to get started — or keep going! — no matter what stage you’re at.
Disclaimer
FirstStep is licensed to operate in Australia and only Australian citizens and residents can purchase or sell securities through its application. FirstStep is owned and operated by FirstStep Investments Australia Pty Ltd (ACN 612 834 947) — Authorised Representative of Primestock Securities Ltd, AFSL 239180. Equity Trustees Limited (“Equity Trustees”) (ABN 46 004 031 298), AFSL 240975, is the Responsible Entity for the FirstStep Fund. Equity Trustees is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX: EQT).
This content has been prepared by FirstStep Investments Australia Pty Ltd, to provide you with general information only. In preparing this content, we did not take into account the investment objectives, financial situation or particular needs of any particular person. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. Neither FirstStep Investments Australia Pty Ltd, Equity Trustees nor any of its related parties, their employees or directors, provide and warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it. Past performance should not be taken as an indicator of future performance. You should obtain a copy of the Product Disclosure Statement before making a decision about whether to invest in this product.
