I'm 23 and have been thinking about this a lot lately. It forced me to consider what I value. Do I want to spend my money on a nice flat? Clothes? Food? Etc.
I found it very difficult when you try to factor in compensation growth and the time value of money.
If I choose to save more money now, that benefits me more in the future because it has more time to grow. On the flip side, saving more money now means less money to spend on enjoying myself and I can't get my youth back.
For compensation growth, if I knew that my compensation would grow by x times in say, 10 years then I could plan accordingly and save less money now because I know that I will be making a lot more money in the future. However, I can't know that so how do I take this into account?
The result of this was me coming up with a very boring answer: save 30-40% of my net income (Equity comp makes this more like 50-60%) and make no assumptions about compensation growth. I'm naturally quite frugal so this isn't difficult, though I think that this is probably overkill and I should loosen up my spending a bit.
Unless you overspend too much, saving currently it's likely a portion of what you'd be earning in several years.
(Assuming some IT field, due to the nature of hacker news)
Yes, I work for a tech company that pays me well with a lot of room for growth and I realize that this is very early days.
I've considered this before, but it feels very unnatural to bet on my compensation increasing drastically even though I can see that it's very possible if not likely.
I found it very difficult when you try to factor in compensation growth and the time value of money.
If I choose to save more money now, that benefits me more in the future because it has more time to grow. On the flip side, saving more money now means less money to spend on enjoying myself and I can't get my youth back.
For compensation growth, if I knew that my compensation would grow by x times in say, 10 years then I could plan accordingly and save less money now because I know that I will be making a lot more money in the future. However, I can't know that so how do I take this into account?
The result of this was me coming up with a very boring answer: save 30-40% of my net income (Equity comp makes this more like 50-60%) and make no assumptions about compensation growth. I'm naturally quite frugal so this isn't difficult, though I think that this is probably overkill and I should loosen up my spending a bit.