# What income percentage do I need to invest to reach financial freedom in 10 years?

Youtube suggested a video to me, I found the title interesting to watch at least the first few minutes, but I ended up watching it all. One fact from the video struck me: “Getting rich enough to retire only takes about 10 years“. I told to myself – this doesn’t make sense. I did the calculation a year back and I got 20-30 years of investing. When I did, I was disappointed and rather stopped with those calculations. Video forced me to recalculate again, whether that fact is bullshit or not.

I started with google spreadsheet, with a few simple axioms like a 3% dividend yield and a 10% increase in value every year (SP500 average for past decades). Let’s calculate with 2000 eur monthly income, but that is irrelevant as this calculation should have the same value as any monthly income. How come you ask? For this calculation, invest/costs ratio is more important than the total invested value. For this calculation, let’s assume we invest all remaining value after deducting costs.

So for a 10% investing rate, I assume we invest 200 eur and our monthly costs are 1800 eur. The next number we need is portfolio value, where the 3% dividend yield can pay 1800 eur monthly. That should be 1800*12 (months in a year) * 33 (3% dividend yield), so we get to 712 800 eur in portfolio value. We know how big of a portfolio we need, now by investing 200 eur monthly, how many years does it take to get to required portfolio value? I adjusted python code from the previous article and got 29 years. That is actually not bad, I would have guessed over 60 years.

Here is the code:

``````current = 0
years = 400
monthly_percentage = 0.0025
monthly_investment = 200
needed_portfolio_value = 712800
for i in range(12*years):
if i % 12 == 0: # increase portfolio value once per year
current *= 1.1
current += (current * monthly_percentage)
current += monthly_investment
if current > needed_portfolio_value:
print(i/12.0)
break
print(current)``````

So is it really enough to work 10 years and get retired afterwards, if you invest 60% of your income?

From the table you can see based on our calculation statement holds true. If you save and invest little bit over 60% of your income, you should be able to cover your costs in 10 years! That is amazing.

The catch? 60% is not easy to save, 60% is not easy to invest periodically for 10 years and it’s also too naive to think our costs will not change throughout those 10 years. Managing to do it consistently for 10 years isn’t piece of cake either. But an interesting topic to think about.

TODO for me to think about? Don’t focus only on monthly investment, but get costs into the picture. Luckily I have been logging every single expense I have for the past 3 years and I can work with the data. Matching costs with investments is definitely something to think about, because I am definitely nowhere near being able to do that now.

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