Foster City, CA

Save For Retirement

Boolsis

Without financial knowledge growing up, I must admit it was difficult at first to really think about retirement.

What Changed?

Eventually, I realized that if I didn’t want to work myself to death I would have to start thinking about my finances and where I’m eventually headed. Sadly, this realization came later than I’d hope when I was already in my 30s. Still, I won’t admit defeat and will work even harder to make sure I can retire. Early if I can.

To get there, I knew that I needed to put money away. How much, for how long, and how often were questions I immediately had. Of course, I did what anyone would do in this situation and went to Google! “How to retire” was the first thing I looked up, if my memory serves me right. That led me down a deep, deep rabbit hole of retirement strategies, personal finances goals, and so much more.

Calculate Retirement Goal

The first thing I had to do was figure out how much money I’d need in retirement so I could live life comfortably. Wealthy would be nice (right?), but priority was being comfortable in retirement. I knew that I would have less needs and lower expenses, so I took my current expenses and subtracted my current debt, which included both credit cards and student loans.

Then, I took a closer look at my expenses and thought about what I wouldn’t need later in life. That gave me a rough estimate of $40,000. And that was still being pretty generous with the occasional trips or outings. Realistically, I think anyone could make due with $20,000 or $30,000 during retirement and still live comfortably.

So, now that I had a rough estimate of my yearly expenses in retirement, I still needed to know how much I’d need in order to get there. That eventually led me down the path to discover what’s called the FIRE movement. Now, I won’t go deep into this movement or what it really means. That would have to be an article all by itself and I don’t consider myself an expert seeing as how I’m not really following it. At least, not fully.

That said, I did find their calculation of your FI number really useful. Your FI number is an estimate of how much money you’d need to retire. It takes your estimated yearly expense in retirement and multiplies it by 25 to give you your total retirement amount. For me, at $40,000 per year, I would need $1,000,000 to retire comfortably. With that amount, I’d invest it into an S&P 500 mutual fund or ETF. With an estimated 7-8% yearly return, I’d be able to take 4% for yearly expenses. So, now that I had an estimated yearly expense and my FI number, the journey starts. I had to take my first step!

Track Spending

To get to my goal, I had to be better at tracking where my money was going. I won’t go into full details here on how I would recommend doing so. Mostly because I already did that in one of my other articles about tracking your expenses. But long story short, I tried out different methods until eventually settling on building out my own spreadsheets and tracking my expenses manually.

This gave me A LOT of flexibility to track and analyze my spending so that I knew where I had to make improvements. My first learning was...I wasn’t making enough money. Sad, I know. Yet, still very solvable.

Increase Income

My career is in the video games industry. I’ll save my life story for another day in another article, but again, TL;DR I’ve always wanted to create video games for a living.

My first job in the industry was working as a game tester for Sony Computer Entertainment America in Foster City, CA where I was making ~8.25 per hour. It was a contract role, which meant no benefits, but I had a full 40 hour week plus overtime. At 23 years of age, it was fantastic! I was playing games for a living while earning a decent salary.

When I finally realized I needed to buckle down, I was about to be 30 years of age. My career had seen lots of expansion and I was now earning $25 per hour working as a Producer at another game company. This was when I realized I needed to earn a lot more if I wanted to start saving more money. I’ve always been really curious and sort of a bothersome coworker who would ask about everything and attempt to create pretty much anything during my personal time. This worked well for me because it fed into my appetite for programming, process, and product.

Eventually, I worked my way towards earning six figures. From there, things only got better. I was now much more efficient at tracking my expenses, fixing any spending issues I had, and was able to put away more and more money into my employer sponsored 401(k) as well as into my own savings. So, why this semi-boring story of my career growth? Because in order for you to save money, you need to earn more money. If you’re having trouble saving money for retirement to meet your FI number, then work on growing your career to a point where you have enough for expenses AND your future.

Pay Down Debt

Another BIG killer to my retirement plan, as I mentioned above, was my debt. As a poor college student with even poorer financial decisions, I accrued a large amount of credit card debt as well as extra and very unnecessary student loan debt. Once I started earning more money, I was able to pay down more of my debt.

Yet, the realization that I could aggressively pay down my debt didn’t click until about a few years ago (it’s currently 2021). What had started off as “ugh, I’ll never pay down my debt” became “okay, I think I can be debt free in five years” and is now “wow, I’ll be debt free in 17 months!”

No, seriously. Given my current trajectory, I think I’ll be able to pay off my debt as well as my wife’s debt in 17 months from today! That is a fantastic feeling and one that I want you all to feel if you’re currently in debt. I can’t wait for that particular day that I actually make the last payment. So, if you’re drowning in debt, then work on it. Find what works for you. Do what works for you and work on retiring with a nice little nest egg. If you’re not sure where to start, I recommend another of my articles where I talk about my journey through the various debt payment methods I’ve tried.

Invest Extra Income

So, you’ve now calculated your FI number, you’re earning more money, and you’re paying down your debt. Win, win, win. Right? What happens now? It’s time for you to put all that money that you’re saving for retirement to work for you. How do you do that? By investing. No, I do not mean let’s toss that into Bitcoin. No, I don’t mean drop everything into that one stock that your coworker has a “hot tip” about.

Whilst I’m not a financial expert or advisor, I’ve found what works for me. And that is investing in a mutual fund that tracks the S&P 500. This has been the best avenue of long term growth for me. I continually put money into this account every month and reinvest the dividends as well as capital gains. Looking at the past historical performances for this particular fund, they’ve had an average return of 12%. Of course, more conservatively, I’d estimate this fund to do an average of 8-9% going forward. This was definitely a safe bet for me. This is a large part of my personal retirement plan.

Never one to put all my eggs into one basket, I also invest in my employer’s 401(k). Since I’m still paying down debt and such, I don’t max out my 401(k). In 17 months I will, though! For now, I’m investing enough to meet my employer’s 6% match, which has worked really well for me in the past.

On top of this, I also have extra income that I can put into more experimental investments, such as various stocks that have more potential to explode in the next 5-10 years. I’m not going to go into this because, again, I’m no financial advisor or stock expert. I just do stuff and it works for me. So, I’m talking about it in hopes that it inspires you to do your own research and find what works for you! The best path forward is your path, but only you can take that first step. I’ve started on my journey and hope to see you at the end!

Let me know if you have any advice or feel like any of mine are worthless. I love getting feedback!

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