This is the money you should have saved, according to your age and your annual income
The money saved and the investments that a person makes throughout his life is building a financial heritage that is key to guaranteeing stability and enjoy a quiet life. However, achieving this requires planning and discipline, although it is not always easy.
One of the tools that can help on this path is the well -known Greene formula, a method created by finance expert Kimmie Greene to calculate How much net assets a person should have according to their age and income level. Adapted to current times, this guide can establish realistic goals to improve the financial situation, they explain from Bankinter.
Greene’s original method focuses on accumulated savings, but its modern application proposes to evaluate the net assets, that is, not only the money saved, but the set of assets and assets of value. To calculate it, financial and material assets (properties, investments, cash, etc.) must be added and subtract debts (mortgages, credits, pending taxes, among others).
While each person must adapt their financial goals to their particular situation, the Greene formula establishes a general guide on the Net heritage recommended at different stages of life. In this sense, Bankinter proposes the recommended objectives for the ages between 20 and 65 years.
20 years
Not all people start at an early age, but in the case of having started quoting before the age of 20, the ideal would be to reach twenty having saved 25% of the annual net income. Many young people live with their parents at these ages and, in addition, some combine the study with part -time jobs. Taking these aspects into account, the assets or savings that should be oscillated between 1,500 and 3,750 euros, depending on income.
30 years
After joining the labor market and having several years of experience, when reaching 30 it should be saved (inverted or as heritage) the equivalent of an annual gross salary. Bankinter recognizes that in Spain, due to the precarious work of young people and at the price of rentals, saving the corresponding to an annual salary can be difficult, so each person will have to adapt to their circumstances.
To calculate the heritage at this age, all goods must be added and the debts subtract them, if any. For example, if a person buys a 200,000 euros house with 80% mortgage and has 10,000 euros in the bank, the heritage will be 50,000 euros: 40,000 that would get ‘clean’ if you sell the house plus the 10,000 euros of the bank.
35 years
At 35, it would be advisable to have the double the gross annual salary. Thus, the assets should be duplicated in five years compared to the previous step, something that will require financial planning in which savings and investments are included, among other options.
40 years
At this stage, the goal is to have accumulated the gross annual salary three times. As the above objective was the salary twice, now another annual salary should be added in five years, which implies a 20% savings rate per year. This means that every year the equivalent of a fifth of the annual salary must be saved or invest. It may seem like a challenge, but it can be achieved with a combination of good investments, disciplined savings and indebtedness control.
45 years
According to the Greene formula, at 45, the net assets should be the gross annual salary four times. In the previous five years (from 40 to 45), a more annual salary must be added to the accumulated, passing three times the salary to four times, requiring a rhythm of savings of 20% per year, similar to that of the previous stage. This can be achieved by maintaining the constancy in savings, taking advantage of salary growth, optimizing investments and eating debts.
50 years
Upon reaching 50 years, a net worth equivalent to cIncar sometimes the gross annual salary. This means that, in the previous five years, an annual salary must have been added to the heritage, maintaining the rhythm of savings of 20% per year. Consolidate investments, maximize income, reduce debts to a minimum and plan retirement should already be a priority.
55 years
At this age a person should have saved Six times the gross annual salary. As in the previous cases, from 50 to 55 years, an annual salary must have been added to the heritage. At this age, retirement is closer, so the financial strategy must become more prudent and focused on security.
60 years
Following the Greene formula, at 60 years the net assets should be seven times the gross annual salary. At this age, retirement is very close, so the strategy must focus on the preservation of capital and the generation of passive income.
65 years
In this age a person should already have eight times the salary or annual gross income. This savings level provides financial tranquility to face retirement without exclusively depending on the pension.
