So you are 40.
And your monthly expense is (exlcuding EMIs) close to Rs 80,000 per month.
You wish to maintain the same lifestyle when you are 60.
Considering inflation of 7.2%, your outgoing would be close to Rs 3,20,000/month when you are 60!
Does this number offer a reality check?
It must and it should!
Unless inflation rate is kinder or you are comfortable asking your children to pay you a monthly amount or you cut down on your expenses be prepared to be spending this kind of money.
And it is only going to go up.
Wish to know how to predict how much you need to live a comfortable life?
Introducing the rule of 72!
The rule of 72 helps you to calculate the approximate number of years which are required to double your money if the interest rate is known.
Example: Suppose you have invested 1 lakh in a financial instrument which grows year on year by 18%. Then the value of the same will be Rs 2 lakhs in 4 years.
This principle can also be applied to understand how inflation will impact your finances.
Example: If your monthly expenses are Rs 80,000 and inflation is 8% per year, then you will find yourself spending Rs 1,60,000 after 9 years. (72/8 = 9)
Sounds simple enough?