What's Your "Number?"
In the 2010 US drama Wall Street 2: Money Never Sleeps directed by Oliver Stone, Shia LaBeouf turns to Josh Brolin and asks him “what’s your number?” to which Brolin’s character, Bretton James, famously responds with “more”!
Meanwhile back in the real world of financial planning, we can be a little more scientific, particularly with the use of planning tools such as cashflow modelers. In this world, your “number” really is the age at which financial independence is attained, meaning the point beyond which you continue working is through choice rather than necessity.
In this blog, we’ll explore a typical approach to determining your “number.”
Defining "Your Number"
"Your number" refers to the amount of money you need to achieve your financial goals and live the life you desire. It's a personalised figure that takes into account your unique circumstances, aspirations, and financial situation. This number is not just about retirement; it encompasses all your financial objectives, whether it's buying a home, funding your children's education, or traveling the world.
The Importance of Knowing Your Number
Understanding your number is crucial for several reasons:
Knowing your number helps you set clear and achievable financial goals. It provides a target to work towards and a benchmark to measure your progress. With a defined number, you can create a comprehensive financial plan that outlines the steps needed to reach your goals. This includes budgeting, saving, investing, and managing debt. Having a clear understanding of your financial needs can reduce anxiety and uncertainty. It allows you to make informed decisions and feel confident about your financial future.
Calculating Your Number
Calculating your number involves several factors:
Start by assessing your current living expenses. This includes housing, utilities, groceries, transportation, and other daily costs. Consider your future financial goals. This could be retirement, buying a home, funding education, or any other major expenses you anticipate. Account for inflation, as the cost of living will likely increase over time. This ensures your number remains relevant and accurate. Factor in the expected returns on your investments. This helps determine how much you need to save and invest to reach your goals. Estimate your life expectancy to ensure your number covers your needs for the entirety of your life.
The Role of Financial Planners
While calculating your number can be done independently, seeking the help of a financial planner can provide valuable insights and expertise. Financial Planners can help you assess your situation, create a plan, and monitor progress. They can provide a thorough assessment of your financial situation and help identify areas for improvement. Planners can assist in creating a detailed financial plan tailored to your goals and circumstances. Regular check-ins with a planner can help you stay on track and make adjustments as needed.
Conclusion
Knowing your number is a fundamental aspect of personal finance. It empowers you to set goals, create a plan, and achieve financial security. Whether you're planning for retirement, buying a home, or funding education, understanding your number is the first step towards a successful financial future.
Would you like help to determine your number? Get in touch via the link below.
