How Do People Save Large Percentages of Their Income?
Traditional financial advice has always suggested that people should save 10% to 15% of their income for retirement purposes. However, financial planners now consider this as outdated advice. This is because of the fact that people no longer have the security of 40 year long stable careers. The hire and fire culture as well as the gig economy which has become part of the new economy are making career stability a thing of the past. This is why movements like Financial Independence Retire Early (FIRE) have become an important part of the modern culture. Many millennials are afraid that they might not have high paying jobs in their fifties and sixties. Hence, they want to generate enough wealth in the first few years of their career.
Now, since the careers have become shorter, the most obvious solution is to increase the amount of money which is saved for retirement so that there is enough money accumulated in the few years that they have until retirement. Many people who follow FIRE state that they save anywhere between 50% to 70% of their income. This seems odd to a lot of people given the fact that they are one pay-check away from bankruptcy. The question really arises as to why can some people save such a large chunk of their salary whereas others can barely get by.
The details about the frugality mindset have been mentioned in this article.
The bottom line is that it is possible to save 50% of a persons income or even more. However, it would entail making some sacrifices. However, if the larger purpose is considered and kept in mind, the sacrifices may be well worth it.
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