I know what you’re thinking…
Another article about saving $100,000 before you hit the big three-zero?
Before you click away, hear me out.
I am sure you would have come across or heard about people who have managed to hit this impressive financial milestone.
But what about the rest of us (me included) who have not, or would not be able to save this substantial amount of money by then?
To be frank, I cannot say that I am completely unaffected by the fact that I am nowhere near hitting this attainable financial milestone that many others have achieved.
And I am sure some of you might be demoralised too.
You might be questioning yourself and thinking that there is something really wrong with the way you manage your finances.
But we don’t think this to be true.
Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any investment product.
TL;DR: Why it is Okay if You Cannot Save $100k Before 30
- Although saving $100k before 30 can be very beneficial for you, you should not beat yourself up over not being able to hit this milestone.
- Everyone’s circumstance is different.
- You can still catch up. Saving $100k in five years is still attainable if you are willing to put in the work.
Importance of Saving $100,000 Before 30
But before we begin, I would like to talk about how saving $100,000 before 30 can be very beneficial for you.
This is because after you save up the first $100,000, the returns from investing can make your life easier.
With $100,000 in your portfolio, you can generate a decent amount of passive income with a dividend income portfolio.
P.S. This is just an illustrative example. Do check out the article above for a more nuanced take.
The Magic of Compound Interest
Here’s another hypothetical example.
Let’s say you decide to live life to the fullest and forgo saving and investing altogether after 30 years old.
You will be surprised to know that you can still retire with a decent amount of savings if you invest due to the magic of compound interest.
If your investment portfolio returns 8 per cent a year, $100,000 will become $1,173,708 at the minimum retirement age of 62.
If your investment portfolio returns a more modest 4 per cent a year, $100,000 will still become $350,805 at age 62.
For context, this is a lot higher than the Central Provident Fund (CPF)’s Enhanced Retirement Sum of $271,500.
And If you subscribe to the typical Singaporean dream, $100,000 can cover about one-quarter of what you might need.
This amount can be an additional financial buffer on top of your emergency fund that will give you a safety net that enables you to take more risk.
Another additional benefit of achieving the financial milestone of saving $100,000 before 30 is that you will naturally become more frugal and financially savvy.
This is because you would have done things like invested in yourself to get a better job, adopted better salary budgeting strategies, increased your savings rates, or started investing.
Everyone’s Circumstance is Different
As I am writing this, I can’t help but feel a bit demoralised as I will miss out on the benefits of saving $100,000 before 30 as I will be turning 30 next year.
You might feel it too.
It’s also not your fault that you cannot achieve this goal despite the hard work as everybody is dealt a different hand in life.
But, it’s never too late to start.
Take me for example.
I started my personal finance journey quite late in life. Fresh after graduating, I only manage to save about $10,000 and had a student loan debt of $32,000.
This means my net worth was negative $22,000 after graduation
The fact that I took close to seven months to land a paid internship after graduation did not help either.
But thankfully, I was able to clear my student loan debt after two years.
This is something to be thankful for and I am at peace with not being able to achieve this financial milestone at 30.
The best time to plant a tree was 20 years ago. The second best time is now.
I hope that you might be encouraged by what I shared and challenge yourself to save your first $100,000 in five years for your own sake.
Here’s how you can do so.
How to Save $100K in Five Years
Although the goal of saving $100,000 may seem daunting and is certainly not easy.
You can break it down to something more attainable if you work on upgrading yourself to find a better paying job, negotiate a higher salary, save more or invest.
You can also take up a side hustle to add to your savings. Here is a guide on side hustles if you are looking for someplace to start.
How to Save More
One of the things you can do to save $100,000 in five years is to put away more of your savings.
Check out our article where my colleague wrote about how she put aside 70 per cent of her entry-level salary every month.
How to Invest
But saving can only get you that far.
You will need to invest as well.
Check out our ultimate guide to investing for a place to start.
If you got any questions about investing, you could ask the savvy members of our community on Seedly too!
Even if you managed to save $100,000 later on in life. Like when you turned 35 for example.
It’s not the end of the world.
For example, if your investment portfolio returns 8 per cent a year, $100,000 will become $798,806 by the minimum retirement age of 62.
If your investment portfolio returns a more modest 4 per cent a year, $100,000 will still become $288,336 at age 62.
This is still higher than the Central Provident Fund (CPF)’s Enhanced Retirement Sum of $271,500.
Know Your Why
Saving $100,000 is beneficial and all, but the most important thing in my opinion is for you to know your why.
As much as I hate to admit it money can make things happen.
It could be some life goal that you want to achieve.
Maybe you want to start a family. Perhaps you want to quit your job to open a cafe (spoiler alert you need at least $100,600).
Or maybe you are someone who is a bit nihilistic.
Last I checked, wandering through life and finding interesting things to do costs money too.
Mindlessly Pursuing The Goal Can be Harmful
Also, an important thing to remember is that even if you ‘fail’ at this challenge it’s okay too.
If you can’t save $100,000 in five years time, saving $80,000 or $60,000 is pretty good too.
You need to set a savings goal that is a realistic goal for yourself and no one else. There’s a reason why it is called personal finance.
As cliche as it sounds, the saying comparison is the thief of joy applies here.
The best way forward is to not compare, focus on your own journey and keep moving forward.