Experts say the retirement amount is around 25 times your yearly net expenses. Let’s get more into it.
- Calculate your monthly expenses.
Make a list of every single expense that comes out of your checking and credit card accounts in any given month. Remember that there are payments that are quarterly or once a year, like city taxes or car maintenance. You need to estimate a monthly amount to add it to the monthly list. I like to divide my monthly expenses into 2 categories:
- Basic Expenses: These are the ones that need to be covered no matter what, like mortgage payments, car payments, insurance, food, bill payments, taxes. Take a look at my November 2020 expense list!
- Extra Expenses: These are the ones that I would be able to cut if let’s say I lose my job. Example: Recreational spend, personal spend, gym membership, savings.
- Once you have the monthly amount then multiply it by 12 to have a yearly amount.
- If let’s say, your yearly expenses are $40,000; then your retirement amount is 1 million dollars (40,000 x 25).
This 1 million dollars means that you need to have a net worth of that amount or investments equivalent to it.
On the next post, we will be covering net worth.
Have a great day!