How much money do I need to invest in the stock market to retire early in 10 years? That Is the most common question people ask me. I am a student I can only spare 25€ in a month is it enough? I have no experience in investing how much money do I invest in stocks? Today I am going to discuss exactly how much money do you need to save and how much money do you need to invest in the stock market!
Before I talk about the number we need to discuss the motivation behind investing.
Why do you want to invest in stocks?
The answer could be to save your money from Inflation, or you want to save money for your retirement, you might have a midterm goal or you just want your money to make more money but most people often hate their 9-5 jobs and they just want to make enough money that they can quit their boring job and either retire or do something that they love which might not be as financially rewarding as their current job or at least in the short term not as financially rewarding.
Then we need to talk about how much money do you make and how much money do you actually save
How much money do you make how much you save?
As a student you might be just making ends meet, maybe you just got a new job and have started making decent money or you might be someone with a family and saving is a bit tough
Saving money can be hard But I know so many people who buy the latest iPhone as soon as it comes out, the latest tech, designer clothes anything and everything that’s shiny. They buy this stuff with the money they don’t even have. And you might even be one of those people! To that, you might answer yeah what’s the point if I cannot spend the money that I earn. Sure there is no problem with that but if you spend more than you earn, how can you sustain your lifestyle.
Invest in the stock market to retire early in 10 years
So for the sake of simplicity, let’s that the average take-home pay after taxes of 2500€ and you are able to save 5% out of this each month. That makes 125€ each month and if you invest this whole amount and get an average return of 5% a year. In 40 years you will have about 181K € and assuming if you are 25 years old now having just 181k when you retire might not be enough at the age of 65.
Let’s increase the savings amount to 25% so you spend 1875€ and save 625€ out of your 2500€salary and again if you invest this amount monthly and get a return of 5%. In 33years you will have enough money to retire and live off your investments if you spend 1875€ a month
Now lets take the savings rate really high, and say that you are able to save 50% of your salary each month and invest 1250€ every single month. In 17 years you will be able to save approximately 400k€ and would be able to retire at the age of 42
Let’s just take this to a whole new level and say that you are somehow able to save 65% of your salary spending just 875€ a month, saving and investing a whopping 1625€ monthly. In just 10 years you will have about 250k€ and would be able to retire if you keep your spending at the same rate.
Just think about it, being able to retire in 10 years. Invest in the stock market to retire early in 10 years by reducing the money you spend and instead invest it and let your money grow. Now retiring doesn’t have to mean that you don’t do anything. It actually being able to do whatever you want to do.
The goal here is to expedite the process of being financially independent, so the more spending you reduce the more you can invest. And spending money on things that make you happy does help but if you are one of those millions of people who absolutely despise their jobs having enough money to be able to do what you love would definitely make you happier compared to those small doses of happiness.
But before you go on and invest every single thing you have it is always recommended to have an emergency fund. Start with at least 1 month of your salary which you do not touch. That is only meant for emergencies. Wanting to buy a new phone is not an emergency nor is getting a new car. Try to increase your emergency fund to 3 to 6 months of your salary.
To summarize Reduce your spending to increase your savings as much as you can. Save at least 50% of your salary and if you can save 65% to be able to retire in 10 years! Don’t forget about setting up your emergency fund before diving into investing!
*None of this is meant to be considered as investment, legal or tax advice . As I am not a financial expert nor a tax consultant please do your own reasearch and come to your own conclusions I am only sharing my experience with stock investing. The video and articles are accurate as of the posting date but may not be accurate in the future.