Is our saving rate to low?

Since writing my article about Life after dividents I’ve been giving some thoughts about our saving rate and if I can reach my kind of idea about financial independence. The plan was, except passive income I would have built in this time, to really succeed with FOREX and stay home, trade and start a freelancer side gig.

The savings rate wasn’t modified (it’s still the same as in this article) and that is around 25%. But I feel it is not enough, even if the proccent looks big enough. My process of thinking was also fueled by an article I’ve read recently on Jan Kru’s blog (from Manage your Money), Are you saving enough to achieve your financial goals?.

The article has a nice explanation of the numbers you have to count on, when calculating your ‘retirement’ age and provides an example of a calculator used (which later on we will use in this post to run some simulations).

The numbers

To quote myself: “When we started the path we said we need around 2000USD per month to maintain our current living style. Of course, the idea is to have multiple incomes, not just the dividends, but for the purpose of exercising my math, let’s see how can we reach the 2000USD monthly just by dividends. 2000USD equals 24000USD per annum, considering that most companies pay dividends just one time a year. At a 10% return of dividends, we would need a portfolio of 240000USD“.

When calculating the needed sum I took into consideration a passive return of 10%, so normally I will need a sum that is 10 times bigger. But actually reading multiple articles I found that you need a sum of 20/25 times bigger than your yearly “needs”, resulting in 480.000USD-600.000USD. That is a half million…damn.

My initial plan was to generate 1500USD per month from FOREX, not necessarily a ‘retirement’ and still need some active management, but was my first milestone in assuring a steady (if you can call it steady) so I need to generate 500USD in passive income. Applying the same rules we will need 120.000USD which is more tangible now, not to mention that part of the passive income is already secured.

Now going back to the calculator I mentioned, let’s run some simulations.


The needed input data is pretty straightforward to understand. You need your age, retirement age (at what age you want to quit working), monthly saving range (how much you save each month), Current wealth (how much you saved until now), Saving target (how much you need) and the annual return of investment.


This is the current situation we are facing, my age, my target, etc. I’ve chosen an 8% return as we have investments that generate 10% and some that generate less than 8%. With this numbers we will get the following information:

image 1

Which is not close to what we need, but not exactly there. If we had investments that generate 8% per year we will get 3.376USD per annum, 281USD per month.

How can we solve this situation? Let’s see if we get a monthly investment of 1000USD. We will get 6.313USD per year, 526USD per month. But in our current situation, that investment sum can’t be sustained at the moment.

image 2

Is there good news?

Actually there is some good news.

  • The fact that we need to invest 1000USD per month can also be achieved soon
  • If we continue to invest only 500USD, we still can achieve the target, as I mentioned in another post we already have a rented studio that is contributing to the monthly income. In fact I will start some posts regarding our progress to the 500 USD target.
  • We can be financial free in 5 years if the FOREX plan kicks in
  • Actually, I can work for 2-3 years more, to give more times to the investments to kick in.

Thank you for reading this!

Disclaimer: I am not a financial consultant! All the information you find here are my decision, I have taken at that moment, on my own analysis. I am open to any type of discussion about money. If you want to replicate my portfolio take into consideration that it is your money and you can have losses.

P.S. I’ve discussed with Jan, as we are both on some common groups, to make sort of featured articles, so you will find one of the FIinRomania articles on his blog, and as a courtesy we linked to his blog with this nice badge he provided.

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P.S.S. Photo header by Aaron Burden on Unsplash

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