Here's a poll the audience question! Who will be able to retire first, someone who makes $100,000 a year or someone who makes $50,000 a year?
If you said "there is not enough information to decide" then you are correct! Financial gurus routinely tell people to try and save 10% of their income. Let's say the 6 figure Lady manages to save a "respectable" 10% of her income, which means that she spends $90,000 every year. If she wants to maintain her flashy lifestyle when she's retired, she needs $90,000 x 25 = $2,250,000 in order to retire and maintain her current spending lifestyle. Since she saves $10,000 a year, that means she can retire in just a speedy 41 years! right on track with the rest of her peers...neat-o!
Let's take a look at her counterpart. This thrifty lady makes $50,000 but she only spends $20,000 a year. That's a much more impressive savings rate of 60%! If she can keep that low spendy-ness during her retirement, then she will need only $20,000 x 25 = $500,000, and by saving $30,000 a year she will be able to get there in just 11 years!!!! Once she has reached her target, she can continue to work if she wants, although she won't be dependent on the job and the paycheck (and she will save a total of $6.8 million in the same 41 year period that the Spendy Lady saved just $2.25 mil.).
Of course, the ultimate retirement building tool is to combine those two examples of a high income with low spending. If Thrifty Lady gets a few raises, promotions, takes a second part time job, etc and winds up with a final income of $100,000 but maintains an annual expenditure of $20,000, she will be saving 80% and could retire in just about 5 years, or have 18 million in 41 years if she just totally loved her job and didn't want to stop working.
Really to get the best bang for your buck, saving at least 60% (or even 70% or 80%...the most you can comfortably handle while still enjoying your life) of your salary is the way to go because it's WAY more powerful than increasing your salary by that same percentage. You will keep yourself from buying all sorts of stuff you don't need and can't afford, while bringing freedom and the option to choose how long you will work! People usually start working at a low salary and get raises and bonuses and such as they go. Even if you can only save 20%, or 10%, trust me you are blowing most Americans out of the water. But you can get to work flexing those frugal muscles to increase the percentage saved each year and quickly speed up the rate to financial independence.
Here's a little dirty secret: if you spend 100% of your income, a bonus or a promotion will not help you. I bet you will have already spent that raise in your mind. No matter how much you make, you are someone who is likely to find themselves living paycheck to paycheck. So work on flexing those frugal muscles right now...how much can you save this month if you really cut back on unneeded expenses like a cable service and daily coffee at starbucks? If you can manage to increase your income while keeping spending constant, you could be no more than 10 years away from retirement.