What the benchmarks assume
The salary multiples come from retirement-plan research, and they assume a great deal: that you began saving around fifteen percent of your pay at about twenty-five, stayed employed, and intend to retire in your late sixties. If you spent your twenties in school or paying down loans, you are not behind in any way that matters. Put your attention on the number you control, which is the share of each paycheck you keep.
Goals by decade
In your late teens and early twenties the goals are small and structural. Open a checking and a savings account, build a first cushion of one month of expenses, begin a credit history, and capture any employer retirement match on the day you become eligible. A match is an immediate return that no market offers.
In your mid to late twenties, grow the cushion to three to six months of expenses, clear any debt charging more than about eight percent, and raise retirement saving toward ten to fifteen percent of gross pay, counting the match.
In your thirties the goals get larger and start competing with each other: a down payment, children, a bigger retirement balance. This is the decade to check that raises are not being absorbed entirely by a nicer life.
Turning a wish into a goal
A real goal has a dollar amount, a date, and a monthly figure that connects them. "Save for a house" is a wish. "Hold $30,000 for a down payment three years from June" is a goal, and the division gives about $833 a month.
- Write down each goal with its amount and its date.
- Divide by the months remaining to get the monthly cost.
- Add up the monthly costs and compare the total with what is left after your fixed bills.
- Rank the goals and fund them in order until the money runs out.
If the total is impossible, you have learned something useful for free. Move a date, shrink an amount, or go after more income.
Too many goals
Most people can fund about three goals at once: one for safety, one for retirement, and one thing they actually want. Five goals fed forty dollars a month each produce five disappointments. Automate each transfer for the day after payday, so that progress does not depend on how disciplined you feel that week.
Tip When you get a raise, send half of the increase to your goals before the first larger paycheck arrives. You never adjust to money you did not see.
