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Due to the current socioeconomic circumstances and the uncertainty of what may happen with our work, taxes or inflation, it is convenient to save month by month.
There are many methods that we can use to save and not only make ends meet, but also make sure that when we retire, we have the money enough saved to have a decent life.
However, most economists recommend that we should try to save at least 25% of what we earn every month, something that we should start sticking to at age 25.
But there is also the call Greene formulawhich basically tells us how much we have to save and at what rate to ensure a good retirement, and two variables are taken into account: the gross annual salary and age of the person. To do this, economists offer a series of recommendations for money saved for when we reach a certain age.
So the Greene method or Formula puts a first objective on the table: we must reach 30 years of age having saved the equivalent of an annual salary. In this way, we must have the equivalent of what we earn annually at that age well saved in the bank.
The second step of this method states that you have to adopt a savings rate that is as constant as possible, being able to save that mentioned 25% every month compared to what we earn.
The third step is that every five years you have to save at least one gross annual salary.
What we should have saved when we retire
In this way, if at the aforementioned 30 years we had to have saved the equivalent of an annual salary, when we reach 35 years, we should have saved twice our annual salary and when we reach 40 years, we should have savings equivalent to triple the salary.
Following successively every five years, when we reach 45 years, we should have saved four times our annual salary and when we reach 50 years, five times our annual salary.
So by the time we reach our retirement age at about 65, we should have at least the equivalent of eight gross annual salaries, well saved.
It is not an infallible method, obviously, but it is a flexible formula, at the same time that it allows us, every five years, to manage what we have saved to know if we are on the right path or make other types of decisions.
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