3. Calculate Your Savings

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Once you know how much money you spend on a monthly basis, it is time to calculate how much can you save. Luckily, there are a few strategies that you can use. Choose the one that fits your needs and income the best.

The first strategy is to have 25–30 times your anticipated annual costs plus enough cash on hand to cover one year’s expenses. To get an estimate for the year, start with your monthly spending and multiply by 12, then find your “target” range. Here’s an example: let’s say you have $5,000 in expenses per month or $60,000 annually. By using this method, you will need $60,000 in cash in addition to between $1.5 and $1.8 million to retire.

The second strategy is to divide your annual expenses by 4%. For instance, if your annual expenses are $60,0000, divide that number by 0.04% which means that you will need  $1.5 million for your retirement. However, if your finances can allow you that, you can try to increase your retirement budget and divide your estimated annual costs by 3%. 

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