If you are 30, married and living in some Metro, chances are that you are spending close to 30,000/- every month on your household. You pay every month for services like phone bill, dish TV, maintenance, groceries, milk, maid expenses, and so on. While the rule of thumb says that we should save close to 30% of our monthly income but the truth is that something or the other keeps coming up and we end up saving very little. And on top of it majority of us have loans on us, be it a personal loan for maintaining our life style or a home loan for that dream home of ours.
Chances are that as your family grows and your lifestyle improves, these expenses will also grow along with. As a matter of fact, your growing salary will compensate for your growing monthly expenditure. But, what will happen when you stop working. How will you adjust your increasing monthly expenditure with your never growing or static pension?
Let’s assume your expenses are Rs. 30,000/- per month and will grow at only 7% every year. For a 30-year-old, this is how the numbers will be when he turns 60.
If today, a 30-year-old is spending Rs. 30,000/- per month, he/she will be spending 2.28 lacs per month in the year 2047 when he will be 60 years old. Don’t confuse expenses with inflation which is currently at 2-3%, because our expenses vary on other factors also like our lifestyle, growing kids, aging parents. So, inflation is not the only parameter.
If he lives till 80 years for your age, how much lump sum will he need at his age 60 to maintain the current lifestyle (30,000/- p.m.)? And, let’s assume that his expenses will get reduced to half once he retires. For anyone a clean guess would be: maybe 1 – 2 crores.
But, In Actual the Total Lump sum corpus which he will need to sustain his retirement is 3.7 crores.
And, how much should be saved monthly to achieve this amount. It can be easily achieved by saving Rs. 11,000/- per month for the coming 30 years (assumption: saved in an instrument which has 12% rate of return).
What we just discussed above are assumptions based on one scenario, and cannot be applied to each and every one. Every individual is different and has different spending pattern, life goals, etc. Hence, there is no size that fits all in case of financial planning. Some might be spending more than the assumed scenario of Rs. 30,000/- per month or for some the needs might be less during retirement years like there won’t be any rent or EMI, or kid’s expenses. So, the right approach is to get your financial planning done as per your aspirations and situation.
There is no doubt that you need to plan your finances well in advance to avoid any major setback which might jeopardize your retired life. There are two things where everybody gets stuck – WHOM TO ASK? And another thing is INACTION. We leave it until tomorrow which never comes.
For the first question, you can check with any practicing Certified Financial Planner who knows his maths well to understand your queries and resolves them amicably. For your INACTION, only you can be the driving force for your secured financial future.
Charu Hastir, CFPCM is founder of http://www.theriteplan.com/. Rite plan is an online financial planning portal created to achieve a single objective of providing easy and Do It Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/