Assumptions on living costs, net earnings, and savings for investment
Living costs
The aim of building savings rapidly requires a willingness to scrimp and save on living costs for a period of time. It is assumed for individuals, an amount of $30,000 per year will be set aside each year for living costs. For married couples, a joint allowance of $45,000 takes into account two can live more cheaply than one. These allowances should be sufficient to cover all living costs, including fluctuations in expenditures between years. The allowances of $30,000 and $45,000 are expected to be sufficient to cover cost of living increases. No allowance is made for salary increases, and any salary increases that do occur will be directed to support living expenses and cash savings.
Net earnings and Investable Income
Three levels of individual gross income are included in TABLE 1 below to increase the applicability of this study to a wider range of people. In addition, these individual incomes are combined to show the effect of a marriage partnership on the ability to save and invest. Federal tax rates for 2009 are utilized in the tax calculations. This is a little conservative as the gross income in the calculations is static, whereas bracket creep is allowed for in the tax rates in later years (fairly minor difference). A further allowance of ~7.7% of gross income is made for State taxes and other salary deductions. After deducting taxes and living costs the net investable income per year is determined for each individual investor and the married partnerships.
