Will you have enough money when you want to retire?

A scary question isn’t it.  I meet quite a number of people who don’t want to even think about retiring let alone thinking if they will have enough money when they finally do want to retire.

The answer to the question was the subject of a presentation at a network breakfast I attended.  A certified financial planner used a case study to illustrate the point.

We probably all know this.  We are living longer.  But maybe we hadn’t quite connected the dots in terms of having enough money to retire on.  It wasn’t that long ago that the life expectancy after retirement at age 65 was only 9 years.  Now it can easily be 20 to 30 years, so the number of people potentially outliving their capital is going to be quite significant.

The website My Longevity has gathered data to help you work out your life expectancy based on your lifestyle rather than actuarial data.  It is worth spending a few minutes to complete the questionnaire to see what your life expectancy could possibly be.  I did mine and unless I get hit by a bus, I potentially will need my capital to last until I am 106!!  I certainly don’t have enough to last that long.

Where’s the money gone?

I was chatting with a friend earlier this week, (over a cup of tea and these really divine mint chocolate chip cookies) that got me thinking about this very topic. No I don’t just mean this week or this month but over all the years we have been in the work force.  What have we done with all that money we have earned?

money diary

‘Maybe it is something to do with turning 50, but for the first time in my life, I am wondering where all that hard earned money has gone’, my friend said.

‘Do you really want to know?’ I replied

‘Probably not, I think the answer would scare me’.

What a thought provoking conversation.  I am not sure I would want to know the answer to that question either.

Part of the answer is obvious, the taxman takes a good chunk of what we earn, as does the bank if we have a mortgage or the landlord if we rent.  Then of course we have to eat. If we have children they suck up a lot of income as well.

But what do we do with the rest of it?

Are we as ‘comfortable’ financially as we would like to be whatever age we are?

I am finding more people that I talk to saying ‘No, we aren’t where we want to be’ and this isn’t just the 50plus age group, younger people are saying the same thing.

The second part of the sentence goes something like, ‘But we don’t know where it has all gone’.  We remember the big ticket things, like cars, holidays, but what about all the smaller things that we just seem to have frittered away our money on?

Ok, I know you men are thinking of your partners and what is buried in the wardrobe, and we girls are thinking of the shed or garage that houses the boy’s toys.

The age of technology has really helped us spend our money, we pay bills electronically, we have multiple cards so we don’t need to carry cash so whilst transactions have become easier; our awareness of money and where it goes has faded.

My challenge to you is to bring that awareness back to the front of your mind by tracking your spending.  Keep a money diary, (just like a food diary but for your money), write everything down (yes I mean hand write) you spend for a month in a notebook.  I am sure you will learn a lot about your spending habits over the course of the month.