09/01/2018
Financial Life Laundry
One day it occurred to me that if I live to 100 years old or beyond, I really needed to work out if I have enough money saved to sustain my current lifestyle.
I keep listening to the news, wondering how bad things will get for us all whilst, of course, hoping for the best. There’s so much uncertainty its hard to escape getting caught up in the chaos. The only thing I am in control of is how to run my own life and my own finances.
I have gone through all of my monthly finances with a fine tooth comb working out where I need to budget and cut down to make all the numbers work for the future. The easiest way I found was to complete a spreadsheet so I could see things year on year and keep an eye on where prices are creeping up so I can get competitive quotes rather than just accept the rises as unavoidable. Allied to this I have worked out what I can afford to save and what is left to invest it.
So here’s a useful formula you can use to give a snapshot of what savings you need for the 100 year life.
Work out your total monthly expenses
Multiply this figure by 12 (equates to your annual spend)
Multiply your annual spend by 25
= This shocking figure is how much you need to have in the Bank
Example:
Monthly expenses of say £1,500
Multiply by 12 = £18,000
Multiply by 55 (representing 55 years) = £990,000
That’s the figure you need in the Bank if you are 45 years old and retiring today to live to over 100!
In practical terms, its more likely that most of us will retire in our late sixties as things stand at present but that still means we need £432,000 saved at that juncture.
It doesn’t make easy reading but it concentrates the mind as to where one needs to budget or cut down on current spending, so you don’t have to face the possibility of downsizing in order to reduce monthly expenses.
Planning is key in a long life and the first step is analysis.
