I just saw a survey in an American poll that only 20% of the people surveyed think that they can ever retire! Is that not appalling? I mean imagine being told in your 30s or 40s that you will NEVER be able to retire because of your income and expense levels.

Then I began wondering whether the 80% were sure or were they just lacking in confidence? What about the 20% of the respondents? Were they over-confident or just sure?

So I asked a few friends. The answers were on the predicted lines. They had no clue!! Imagine at the age of 44 you have no clue about your retirement. In this cruel world her retirement could be 6 years away, and she had no clue!

There is just one way to have anything better than a (wild ) guess about what your financial future may look like. Plain and simple, do your math and look at YOUR financial numbers. No you do not need to be a math or physics professor at IIT to do this nor do you need a financial adviser to do this for you! There are enough calculators around the world for you to do this.  You just need some patience and the ability to be honest with yourself. If you do not have that see if your spouse has it. If both of you lack that go to a financial planner who understands all this jargon!

Step one is to find out how much are you currently spending! This is easy. Take your bank passbook and your credit card statement – it shows all your cheque based expenses. See how much cash you withdraw on a monthly basis. Totaling up these numbers tells you how much you spend on a monthly basis. Now add up the annual expenses – like festivities, weddings, etc. That my friend is what you spend. Easy is it not?

Your retirement spending might be lower (if you will have paid off all your loans and your kids have gone away) or it might be higher (more travel and medical costs?). Make adjustments and don’t expect to arrive at the perfect number. You have an approximate number. This is surely not a bad start. Most people don’t know what their numbers are and have never thought about it. You have at least made a start!

Remember to adjust this for inflation.

So if you are 40 years of age and you are spending Rs. 55,000 per month including Rs. 10k for your kid, it means your expenses are Rs. 40,000 per month. This adds up to Rs. 480,000 per annum. Add Rs. 120,000 for expenses like vacation, festivals, gifts, etc. That makes it Rs. 6L p.a. Assuming an inflation of 10%, it means your expenses will double every 7 years. So your expenses will be Rs. 3L per month when you retire at the age of 60.

We will then have to look at your Income!