In an article by Neal at Wealth Pilgrim, he asked the question “Has it ever occurred to you that you shouldn’t always try to make extra money?” He then talked about a 25 year old who was having some problems in saving money for his retirement.

Well, in my own opinion, it really does take some things to consider. Like if you are achieving to have a small purchase of a gift that you are planning to give to a special person, then I would say that it’s not a problem. But in terms of the retirement as an example, you would really need to factor out or write things down to know exactly what you want to have.

First is you would want to specify when would you like to retire, as most people retire on the age of 60, nowadays, people are able to retire at an earlier stage provided that they are financially free. So let’s say that you would want to retire after 15 years. On the age of our friend who is 25, he would be 40 by that time. It would be either too early or too long for your point of view, but let’s just keep it this way for our example.

Second, you must specify how much is your average spending each month. Let’s say that it’s roughly $2,500 (could be more or less), then calculate it by twelve months is equal to $30,000 in one year. After 15 years, you should have at least $450,000 in your bank account.

Now if you placed your savings in a bank account, it would definitely be more than that with interest. And if you add some leveraging of good debt, you could even earn more than that. But it really depends on your knowledge and experience.

Going back to our example, if you think that you could retire after 15 years of working, and live on a $450,000 budget for the coming years, then definitely good. But if you can’t, then you would need to find another source of income that would be able to support you especially when you have already started your retirement.

My recommendation is to start your own small business online or offline, whichever that you choose to provide you with income. I think that’s the best way to go along with it.

What about your thoughts? They do matter and I’m waiting for them. Post them here.