I have figure that I need two million dollars by the time I am 70 years old to f

Question

I have figure that I need two million dollars by the time I am 70 years old to finance my expenses from age 70 to 95. I am currently 40 years old. I have no savings. In fact I have $30, 000 of debt. My annual pretax income from freelance work is $88,000 per year. I am single and I have living expenses of $2,000 per month. I rent an apartment. How much should I save each year to reach my financial goal? Please illustrate with Excel and please include a graph which will be easier for me to understand. Thanks.

Explanation / Answer

Let's say your total assets is F(t) F(0) = -30000 That is your starting worth. Let's say your expenses are E(t) Per year, you spend 12*$2000 = $24000 on expenses So, E(t) = 24000*t Let's say your tax rate, R, is 28% (this is pretty conservative). Then your pay per year, P(t) is: P(t) = (1-R)*88000*t = (1 - 0.28)*88000*t = 63360*t So, your total assets is: F(t) = P(t) - E(t) + F(0) F(t) = 63360t - 24000t - 30000 F(t) = 39360t - 30000 This is a linear relation. In 30 years, when you are 70, not adjusting for inflation, you will have made: F(30) = $1,150,800. That's if you save everything. You will need to invest to make more money or take on another job or more work. If you have some numbers on interest rates on accounts, we can figure out how much to invest to get more money.

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