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What Will You Get From Social Security?
It's worth thinking about how much money you'll need in retirement. Very few things will sober you up faster than to realize that you are nowhere near where you need to be.
You can Google "retirement calculator" and find a variety of widgets out on the Internet. I don't necessarily endorse that because it might send you into a massive depression. Depending on how you tweak the numbers, they could recommend that you set aside $5,000 or more per month.
One number that can give you a little relief is your Social Security Report. I'm not sure what the equivalent is in Australia, UK, Canada, or other countries. But I'm sure there's a place you can go online and find out what you can expect in retirement.
For folks in the U.S., just check out the Social Security Administration's online services at http://www.socialsecurity.gov/myaccount. You'll need to create an account with your Social Security number and other information. Once you're in, you can look at the contributions you've made over the years and find out what you can expect if you retire at 67 years old, 70 years old, or even an "early" retirement at 62.
As of January 2016, the average Social Security retiree receives $1,341 per month. I HOPE your number is a lot larger if you're in the I.T. industry because it's based on your taxable salary (whether through W2 or Self Employment Tax). As your wages go up, your monthly retirement payment goes up.
The formula can be found at https://www.ssa.gov/oact/cola/Benefits.html. All that really matters is that you should maximize your payout by maximizing your income! Every year of higher earnings increases your monthly retirement payout until it reaches $2,639. (It goes up a few dollars every year.)
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What Has Any of This To Do With Computer Consulting?
Here's the deal, my dear friends. You HAVE to save for your retirement. You have to because nobody else will. If you manage to get your Social Security to top out at $2,700/month with inflation, that's $32,400 per year. If that's your only income, it means you eat top ramen every day for the rest of your life.
If you want to live on the equivalent of $75,000/year today, you'll need to have enough investments to match your Social Security payout.
Let's assume you could somehow manage to get a reliable 5% payout year after year, you'd need to have about $650,000 in savings ($650,000 x 5% = $32,500). Your numbers will vary, of course. But the point is, you need a LOT of money to live decently when you retire. Even if you only plan to live for ten years after retirement, most people will need at least $500,000.
How are you doing?
If your numbers are not where they should be, take that as a huge sign that you need to fix your business! You need to bring home enough money to live AND put money into your investments. That means you have to stop running a business that doesn't support both your lifestyle and your retirement.
Raise your rates. And raise them every year from now on. Keep ahead of inflation.
Sign contracts. Create recurring revenue.
Stop wasting time.
Stop wasting money.
Reject small clients who take lots of time and spend small amounts of money.
Love and pet and take care of clients who do what you tell them to do and pay their bills on time.
Get paid in advance for everything.
All those things you "know you should do" are focused on making your business run better and more profitably. It's not about technology. It's about creating a business model that gets you past today and they month and this year. You business needs to look at the big, big picture and not be distracted by the daily minutiae.
If you run your business minute by minute and interruption by interruption, you have a break-fix life!
Instead, step back and look at what you need to accomplish in the next ten or twenty (or thirty) years in order to set yourself up for a great retirement. When you understand that there's a huge goal out there and you HAVE TO reach it, you will have a much easier time putting your daily struggles into perspective.
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Now go figure out how you're going to find another $1,000 to invest in your future.
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Quote of the Day:
"If you would be wealthy, think of saving as well as of getting." - Benjamin Franklin