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How Much Income is Enough?

July 18, 2018

How Much is Enough?

In my last post, I attempted to address the need for a plan when you have too much time on your hands. As I mentioned for most cases, we will add more than 2,000 hours per year once we retire and leave our full-time employment. Since we are dealing with so new much time, it makes it crucial to have a plan (so you do not set around eating bonbons for the rest of your life.) So how much is enough?

How much income will you need to make your life run the way you want it to run?

If you plan to travel two or three times per year, you will need to calculate how much each of these journeys will take out of your monthly budget.

To give you an idea, last weekend, Lee Ann & I decided to take a weekend trip to French Lick, Indiana. This is a great little getaway, with a TON of history, old hotels and quite a bit to do in a sleepy village in mid-America. But never the less, this little weekend adventure had a cost. We had to be prepared to pay for eating out, our hotel room and any extra activities we were taking in for the weekend.

If you are already living on a budget say, $4,000 per month, you will need to account for these trips and their costs. At MWA, we utilize a simple form with our clients that help them get their spending and budgets together. It is called our “5 Steps to Retirement”.

If you would like to download it, click HERE for your FREE copy.

I know this sounds extremely basic, but many will think it is not necessary to complete such a basic sheet. However, many of you have not been maintaining a budget for a LONG Time, if at all, ever. By taking some time to put these expenses on a sheet of paper, you will truly help yourself get around the idea of your new fixed income.

Case Study

Let us say you are getting $1,850 a month Social Security, and your spouse is getting $1,150, resulting in a total of $3,000 a month. You get another $1,000 from your pension, so altogether you are getting $4,000 a month or $48,000 a year. Then subtract some basic taxes (about 12%) so you have got $42,240 to spend each year.

If you divide $42,240 by 12 months, you will have $3,520 a month. If you subtract your $3,000 in expenses, you are left with $520. That means you have $520 a month you can spend on a little trip just like Lee Ann and I took last weekend. Or an annual travel budget of about $6,240 per year IF you do not save anything.

$3,000 SSI + $1,000 Pension = $4,000 Monthly income.

$4,000 x 12 months = $48,000 annual income. $48,000 – $5,760 taxes = $42,240 or $3,520 per month.

$3,520 – $3,000 = $520 a month or $6,240 a year for vacations.

That truly sounds like a lot to spend on travel and vacations, right? It was when you took 2 weeks a year, but remember, you now have an extra 2,000 hours per year now to do what you want to do. That is the equivalent of around 12 weeks of actual vacation time.

Now, do you see what I’m saying?

So again, will you have enough income?

The Inflow of income and the Outflow of spending need to be considered together. Sure, you may not be interested in traveling that much and want to spend the income in other ways, but here is the bottom-line.

If you do the planning in advance, I can promise you will have a more enjoyable time. Take a minute and download the form HERE, it will save you time and aggravation.

Fill free to leave a comment or Like our post.

Happy Sailing! Alan