The amount you need to retire. Or at least to get financially flexible.Â
I get asked this a LOT. People believe that any detailed study of personal finance means that someone can tell them the number they need to get to.
I get it. All our lives we are trained to work towards numerically clear goals: ‘chasing the number.’ And it is reasonable to ask an expert. What IS that number? And why isn’t it easily available in books and the scores of personal finance videos out there?Â
Reason is simple. Only YOU can determine your number.Â
The number of two people the same age, family composition and health, even the same location, can be vastly different.
Surprised? Don’t be. Take just 3 realities.
- Where you live and choose to spend your ‘retired’ or ‘less earning’ years can greatly determine how much you need. The cost of living well in Thailand is a fraction of what you need for a similar lifestyle in Hong Kong.
- How much you spend is a function of you. One friend who earned similar to me has a more simple lifestyle. I estimate the number he will need will be half of what I would require to maintain my lifestyle.
- The extent to which you have ‘protected’ your money will drive key spend categories with age. Health costs are amongst the highest inflation categories anywhere in the world. If you have excellent health insurance, your number will likely be lower than if you plan to use your invested savings to pay for your health related bills.
I can’t tell you your number. But I can help you calculated it on your own.
Start with the preparation.
- How much do you spend today?Â
- In how many years do you seek to be financially flexible?Â
- How much do you have already in assets, after taking out liabilities and loans?
If you aren’t ready for doing this discovery process into your numbers, look for the post titled ‘shortcuts’ to get… shortcuts to figure this out.Â
See you in Part 2 to arrive at your number.
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