Many people share the dream of saving enough to live comfortably without having to work. Here’s how much you need to save to achieve that goal.
At a time when the exorbitant profits of companies and the opulence of the ultra-rich regularly make headlines, many of our fellow citizens have only one desire: to have more time to devote to their loved ones and their interests. It is often in the hope of freeing themselves from a job that does not satisfy them that some try their luck at gambling, thus contributing to enriching the Française des Jeux.
However, rather than relying on chance, there is a more realistic path, although requiring a lot of effort and perseverance, to free oneself from the obligation to work. It is about gradually building sufficient financial capital to live comfortably on your income, especially if you own your main home.
Let’s imagine that your ambition is to enjoy a monthly net income of 1930 euros without having to work, which corresponds to the median gross disposable income in France according to the most recent data from INSEE. What assets will you need to achieve this?
To perform this calculation, we will base ourselves on an average annual return of 4%, which is a plausible long-term rate for a diversified investment portfolio. According to the Financial Markets Authority, “a varied investment in shares over 15-20 years has generated an average return of 5 to 7% per year”. By using this figure of 4%, you will need to have accumulated financial assets of 870,000 euros. In fact, 4% of 870,000 euros represents 34,800 euros of annual income. After subtracting the 30% flat tax on capital income, you will be left with 24,360 euros net, or a little more than 1,930 euros per month.
Certainly, 870,000 euros is a considerable sum. But by setting up regular savings and making them grow thanks to compound interest (interest from the previous year itself producing additional interest), this objective becomes accessible to some. Concretely, to accumulate these 870,000 euros, you would have to save around 5,500 euros monthly over 10 years, 3,300 euros per month over 15 years, 2,200 euros each month for 20 years, 1,500 euros monthly over 25 years or even 1,100 euros per month for 30 years.
Although these amounts are significant, remember that this is about achieving true financial independence and ensuring a comfortable standard of living, equivalent to the median income in France. Even with a less ambitious goal, you can significantly improve your future standard of living by saving regularly. Obviously, these projections are only indicative. Actual returns may fluctuate depending on the economic situation. It is essential to seek advice to define an investment strategy adapted to your situation and aspirations.
