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Financial security
Financial security means :-
- You have a home and you have paid your home loan
- your food bill is taken care. Means you need not have to worry for future food bill
- Clothing and basic need
- Your utility bills are paid for
- Your insurance is taken care even for future
- Other expenses - such as holiday, travel is taken care
- Other
Retirement planning /Financial planning
You should plan for above items in your retirement planning:-
- Mortgage payment
- Food bill
- Clothing bill
- Utility bills - gas, water, electricity, Cable,
- Insurance payment
- Transportation, holiday or other cost
- Social expenses - gift you wish to give to kids, grand children, festival, marriage of Children, relatives, donation
- Other expense -luxary expenses
You should estimate Longevity- Longevity How Long Will You Live? Will Your Retirement Income & Assets Last Long Enough?
You should also estimate how much money you wish to leave for your Children etc.
How to calculate above cost
Ofcourse it is very difficult to determine the cost:-
- Keep current rent or mortgage payment (or plan how you will pay it before retirement)
- Calculate current grocerry cost
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- Determine your current cost of clothing, entertrainment. Divide it in half (Assuming you will cut this in half post retirement)
- Keep utility bill same
- Calculate insurance cost and multiply by 1.5
- Do same for other cost
Now you have rough idea what your expense look like (excluding inflation, emergency, changes outside your control)
How to generate money for Financial expense
You can withdraw money every year from bank? This is not a good approach
Even if you are not working, to have financial freedom your saving should be generating money for each year.
Example if your estimated expense is 100,000 per year. You probably need 25 times of it in saving. It will generate your yearly expense.
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