How to find your “number” and why doing so is key for successful financial planning

Financial planning is about helping you to live the life you envision and achieve the goals that matter most to you, all of which require a specific amount of money.

That figure is known as your “number”.

Your number represents the total sum you need to achieve complete financial independence without work, retire with confidence, and ensure you can fulfil your goals while supporting your loved ones.

While your number could be a huge figure that would see you being able to achieve your wildest dreams, it could also simply be what you determine as “enough” for you to live comfortably in a life you’re content with.

Identifying your number is an important step in crafting a comprehensive financial plan tailored to your needs, and just as everyone’s income, resources, and aspirations are unique, so too is their number.

So, read on to learn how to find yours and why doing so is key for successful financial planning.

There are several factors to consider when finding your number, but they rely on 2 key questions

The many factors that contribute to determining your number can be distilled into two fundamental questions:

How much income will you need in retirement?
When do you plan to retire?

Both questions can be further broken down into various considerations, but they form the foundation of determining your number – and they are closely interconnected.

How much income will you need in retirement?

When calculating how much income you will need in retirement, there are several expenses to consider:

Regular expenditure – These are your standard outgoings, such as utilities, groceries, mortgage repayments, and leisure activities.
Major expenses – These could include travelling abroad, home renovations, or contributing to your children’s or grandchildren’s education.
Care costs – The cost of care in the UK can be substantial and is important to consider when planning for retirement. The NHS estimates that a live-in carer costs around £800 a week but can rise to £1,600 for those needing extensive care. Residential care homes average £700 a week, while nursing homes often exceed £850. So, planning for potential care costs is essential.
Legacy planning – This includes the assets you want to leave your family, accounting for any Inheritance Tax liability on your estate.

Understanding how much is “enough” for each expense could enable you to retire earlier than planned as you may find you don’t need as much as you thought you did to be content.

Equally, underestimating certain costs could stretch your budget and mean you are unable to fulfil some of your retirement dreams.

So, it’s a good idea to speak to a financial planner, ensuring you can be clear and accurate on what your retirement expenses and income are likely to be.

When do you plan to retire?

There are many factors to consider when planning when you want to retire, such as how much you enjoy your work and what other responsibilities you have.

But outside of emotional considerations, when you retire is largely determined by how much income you’ll need to fund your retirement compared to how much you have already saved. And the earlier you plan to retire, the more you’ll need and vice versa.

For instance, if you retire at 57 rather than 67, you’ll likely need a significantly larger retirement fund. Not only would you require an additional 10 years of income, but you’d also have 10 fewer years to contribute to your pension, making early retirement a more financially demanding goal.

Indeed, Actuarial Post reports that a 60-year-old with a pension worth £200,000 could see a 16% increase in their annual income by delaying their retirement for just one year if they continued to make £200 monthly contributions.

So, though there are other considerations to setting your retirement date, your desired income is key.

Cashflow modelling can help you plan for your future and account for unpredictable factors

A financial planner can use cashflow modelling to help you map out your current income and future expenses to guide you toward identifying your number.

Cashflow modelling looks at your income, savings, and your current and future outgoings to assess your potential financial position in the years to come. It can also account for uncertain factors that can influence your retirement income needs, such as life expectancy, market fluctuations, and inflation.

While these variables are inherently unpredictable, a financial planner can simulate various scenarios to project your future expenses and give you a clearer understanding of the range of funds you might require to achieve your desired retirement lifestyle.

Since what is “enough” varies from person to person, a financial planner will work with you to create a personalised plan, using cashflow modelling to determine your unique number.

To speak to a financial planner, get in touch.

Email [email protected] or call us on 01625 466360.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

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 Financial Conduct Authority does not regulate estate planning or cashflow planning.