This is the last part of my 3 parts rant.
DON’T BECOME A GREAT SAVER WHO LET’S THEIR MONEY SUCCUMB TO INFLATION!
You can aim for financial security with any salary.
Having financial security is to feel peace of mind that your finances can cover your everyday expenses for whatever amount of time you’re comfortable with. You don’t need a big salary to achieve that.
Peace of mind can be different for everyone.
- It can be as simple as having an emergency fund so you can focus on your saving goals toward full retirement, vacation, and/or that expensive camera etc.
- It can be as complicated as having 10x your yearly gross salary so you know you’re covered hopefully for the rest of your life.
- It can be in between that: have enough for emergency and bills and just enough to go thru a few years before finding another income source.
- To make it more simple, you may even think of this whole big scenario as a very large emergency fund –after all, out of a job (via full retirement) is the major reason why you need an emergency fund everyday in the first place.
My peace of mind consist of
- 6 months emergency fund for temporary job loss –> ~$28k (not at goal)
- half of my gross salary as saving use for big purchases, repair, vacation ~$50k (far from goal)
- MOST IMPORTANTLY, I don’t won’t any of my hard savings to lose value overtime due to inflation.
According to Trading Economics, U.S. inflation rate from 1914 to 2017 averages at 3.29% skewed by high inflation during WWI & WWII. In the last 5 years, the average is more like 2.5%. Don’t let your money sit under your mattress or in a saving account collecting 0.05% interest!
In the 1980s, it was easy to keep up with inflation. Put the money in a CD (Certificate of Deposit) account in any bank and collect 5%+ interest.
Today, it has become much harder to keep that dollar value. You certainly have to put a little more effort in deciding where you want to put your money so it’ll grow securely without losing your principal.
Luckily in the age of the Internet, we have more resources within our reach than ever before that will allow us to research and decide where to put those money.
This ends my 3 part rant with FI blogs. Continue to be on the lookout for my other financial posts to see how I view them from an average American perspective.
average, conservative American who doesn’t have expert skills to do side gigs nor enough balls to invest wisely.
This is what I’ve learnt on my 6-month journey to financial independence that I want to share it with you. I’m no finance major, so I won’t be going into the nitty-gritty number game nor the investing jargon nor the politics. Only nuts and bolts in my plain terms as I understand it.