What is your financial strategy to keep up with or outpace inflation?
Thanks to modern medicine, you’re going to live longer and you may need two or three times your current income in the future just to maintain your current lifestyle.
I cannot stress this enough:
If you need to have $70,000 annually to spend, you need to have a strategy to generate an income of $140,000 to $210,000 per year over the next fifteen to twenty-five years.
The best way to avoid being eaten alive by the inflation rate monster is to know your personal inflation rate.
You can do this by tracking your expenses from year to year. I’ve found this more effective than keeping a budget.
If you’re going to keep records of where you spend money, keep them so you can see how the lifestyle you lead is increasing in cost over time.
Don’t feel too bad, however, if you haven’t done this. Most people, including myself, haven’t tracked expenses accurately enough to understand what our personal inflation rate is.
If you’re not going to keep careful track of your spending, assume a high, but still realistic inflation rate estimate.
This will allow you or your financial advisor to do cash flow calculations to determine how long your money is going to last and whether or not you have enough savings to last for your lifetime.
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