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To accurately work out how much money you will need to retire, you will first need to figure out how much you spend now (assuming you intend to maintain the lifestyle your current income affords you).
Some people are great savers and some are spenders. We know too many people who have the attitude that if it’s in the bank, it’s there to be spent. And if there’s not enough in the bank, wack it on the credit card.
The exercise of working out how much you’re spending could be simple or complicated, depending on how you spend. If you use your credit card for all your purchases (including bills), it’s as easy as pulling out your past few statements and taking an average monthly figure. To this, add your rent or mortgage payments and any other amounts of cash you spend each month (you might need your savings account statement for that one).
If you don’t use a credit card, your savings account statement should give you the information you need.
For most people, the expenditure figure will be between $3,000 and $6,000 a month. Multiply that by 12 months and you’ll work out how much you need to live for a year.
Complete this exercise and work out your current cash flow position.
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