Financial planning is about more than just growing your wealth. It’s about designing a life that reflects your personal values, responsibilities, and goals.
At the heart of this process lies a key question: How much is enough?
The figure that represents “enough” for you is sometimes referred to as your “number”. Your number is the amount of money you need for complete financial independence. It’s the sum that would allow you to retire comfortably, lead a lifestyle you’re content with, and support your loved ones.
Your number doesn’t have to reflect luxury or extravagance. For some, it’s about maintaining a modest but fulfilling life. For others, it may mean travelling the world, supporting charitable causes, or leaving a lasting legacy. Your number is personal and knowing what yours is can help you create a financial plan that is unique to your goals and principles.
Read on to discover how you can find your number.
Your “number” depends on two central questions
Finding your number means taking a close look at your goals, current circumstances, and future aspirations. But it all starts with two key questions:
- How much income will you need in retirement?
- When do you want to retire?
So, let’s take a closer look at both questions.
How much income will you need in retirement?
Determining your future income involves breaking down different categories of spending to get a realistic picture of your projected financial needs. These typically fall into four main areas:
- Essential living costs – This includes your regular day-to-day spending, such as mortgage repayments, utilities, transport, food, subscriptions, and leisure. Many of these costs will continue into retirement, although the mix may change depending on your lifestyle choices.
- Larger or irregular expenses – When you no longer have to work, you might plan to take more holidays, support your children or grandchildren, upgrade your home, or take up new hobbies. These costs might not appear monthly, but they can add up quickly and need to be built into your long-term plan.
- Health and care costs – One of the most commonly underestimated expenses is later-life care. Whether it’s occasional in-home support or full-time residential care, the costs can be substantial.
- Legacy planning – If you want to leave assets or reduce potential Inheritance Tax (IHT) liabilities, this should also form part of your planning.
Taken together, these categories can give you a clearer idea of what financial freedom actually costs. You might find that you need less than expected, or that you need to make adjustments now to ensure you have enough in the future.
When do you want to retire?
The timing of your retirement can significantly influence the amount you’ll need. Retiring earlier may give you more time to enjoy life after work, but it also means you’ll need to draw from your savings for a longer period and have fewer working years to contribute.
For instance, if you plan to retire at 57 instead of 67, you will need an additional 10 years of retirement income as well as accounting for 10 fewer years of contributions to your pension or investments.
And even small changes in retirement timing can have significant effects. For example, a report in Actuarial Post found that a 60-year-old with a modest £200,000 pension could boost their annual retirement income by 16% if they deferred retirement for one year and made £200 monthly contributions.
So, it’s important to align your intended retirement age with your savings rate and income expectations, not just your lifestyle desires.
A financial planner can help you find your number
A financial planner can work with you to understand your goals and priorities and how near or far you are from achieving them. They can then help you create a clear plan that reflects your aspirations based on your preferred time frame and current financial standing.
They can use tools like cashflow modelling to simulate different scenarios based on your current and future wealth projections, while accounting for other unknown variables such as:
- Inflation
- Market fluctuations
- Life expectancy
- Unexpected events or windfalls
- Tax changes.
Rather than trying to guess a single figure, you’ll gain a range of projections that help you visualise how different factors affect your long-term financial position.
Whether your goals evolve, your income changes, or market conditions move, a financial planner can help you adapt to shifting circumstances without losing sight of the bigger picture.
Ultimately, your number is more than just a figure on a spreadsheet. It’s the amount that allows you to live life on your terms, and a financial planner can help you get there with both clarity and confidence.
Our team of independent financial advisers in Lewes is here to support you in finding your number.
To find out more, please get in touch by emailing us at financial@barwells-wealth.co.uk or by phone on 01273 086 311.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The Financial Conduct Authority does not regulate estate planning or cashflow planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Production