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The OP is so prudent I'm not surprised he's been able to save 10k per year for retirement on a 40k annual income. I don't think you'll have any trouble managing the new money since you're already anticipating and planning for it. A few final thoughts:
- Expect your income to increase even more in the future, and hence expect your standard of living to rise into your retirement. And be prepared for scenarios where you want to help out your kids or grand-kids at some point in their careers; they may not be as prudent and successful as you are. You'll want more money than you realize now.
- Expect you and your spouse to live longer. Life expectancy is improving rapidly in this country. If you guys are both healthy I would expect each one of you to live at least till 85. And the older you get, the more costly healthcare will be. So again, expect to spend more money during your retirement.
- The 20% or whatever percentage rule is a rule of thumb, and obviously does not apply to all cases. The outcome is especially skewed when you're at either end of the income spectrum. You want to determine your budget more carefully than that. Give me some amount of retirement money you want at age 65 and I can build a financial model to give you a rough estimate of how much you should save.
- Enjoy your new life. It will be very exciting. Congrats on getting there!
But here is the thing, my family makes a comfortable 40k after taxes. We have zero debt, eat good food, live in a decent neighborhood, and don't want for anything. We put away 10k a year into retirement, and still have 6k a year for vacation. We have had a fairly constant income for the last 7 years, and have gotten very good at living at this level.
Soon our take home will double, and then triple just a few months later, but I have no idea how to adjust to that. Already our savings is a years worth of expenses, and our cars have less than 100k miles between the two of them.
First world problems I know, but any advice is appreciated.
What's something you desire a lot but haven't been able to afford previously? A better car? A better house? Better smartphone? A vacation? Think through carefully and find the best possible deal.
You can relax the rules a bit and satisfy more things on your "wants" list but never let go of the financial prudence you've developed when you didn't make as much.. (i.e. never buy the first car you set your eyes on just because your salary doubled.)
When I was unemployed shortly after graduating and living off of my parents' savings for several months in 2009, I had a budget of about $1000/mo in a high cost of living area. Even after I got a job, my monthly budget was still in the low $1000s and it took several years before I was comfortable spending more than 1/2 of what I took home..
That's a very difficult thing to do in practice. When income goes up, it's human nature to desire more comfort. It's the same thing that happened when you graduated from school and got a real job. Suddenly the need to buy something will pop up. A more realistic plan is to upgrade your life in a controlled manner. For example, rent a nicer apartment, buy new clothes, go to music events, eat out once in a while, and also set aside more money for retirement. Build a more generous budget, but still stick with it the same way you've stuck to your current budget all those years.
Exactly. Whenever one of us gets a raise, the bulk of it goes into savings, retirement, investments, etc. But we also put aside a bit more discretionary / disposable income as well (either for short-term things like what we spend socially or for more medium term things like nicer vacations that we maybe could not have easily afforded several years ago). Given that the cost of everything continues to go up, those raises balance out that difference and puts a bit more in our pockets, which can easily be done right along with saving more.
I didn't work my tail off to get to the position I am in now to live the exact same way as I did 10 years ago when my income was a third (or less) than it is now.
But here is the thing, my family makes a comfortable 40k after taxes. We have zero debt, eat good food, live in a decent neighborhood, and don't want for anything. We put away 10k a year into retirement, and still have 6k a year for vacation. We have had a fairly constant income for the last 7 years, and have gotten very good at living at this level.
Soon our take home will double, and then triple just a few months later, but I have no idea how to adjust to that. Already our savings is a years worth of expenses, and our cars have less than 100k miles between the two of them.
First world problems I know, but any advice is appreciated.
I'd use just a mall fraction for some enjoyment or upgrade something to make my life nicer. Save the rest.
We've found, the more things you have, the more upkeep you have. Everything comes with responsibility and visible or invisible costs and maintenance. I'd sit tight for a while and save most of that money as a means to achieve or get what I really wanted out of life.
What a great situation to have. Keep being frugal, save some more, and spend a little on you and your family.
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