There is no “stupid” question. In fact that is the purpose of this forum: to share information and ask questions that you might not be able to ask elsewhere. Grasshopper No.4 (there are 5 Grasshoppers) asked “what is the definition of enough cash in the cask as it relates to retirement”. The little green guy wants a number. Well, here it is. You have some idea of how much money you need TODAY to live comfortably. Let’s say that number you know today is $50,000 per year. How much money would you have to have invested generating 5% return that would give you $50,000 per year. I know all the algebraic minds are already dividing $50,000 by .05 to get an even 1 million in today’s dollars. You are correct! But wait, most of the Grasshoppers have 20-30 years until they retire so they will need to take the $1 million and increase by the 3% average yearly inflation times the number or years until retirement. Probably close to $2 million dollars in FUTURE dollars. Don’t dismay, the money you put aside each year should gain an average of 11.3% each year over the long pull. Those are proven statistical numbers. The numbers you could achieve boggle the mind. Now lets get real, if you fall short of your goal and social security still exists, it will pay you and your spouse $20,000 to $25,000 per year(today’s dollars) so you only have to save half what you thought. Then in retirment, you should be able to live on 80% of your current annual expenses. And then, if you work part time, you’d need to save less. You get the idea. Calculate your own number Grasshoppers.
The last posting “Fill’er Up” just discussed the many ways to generate income. Since you’ve all got a 3 month budget broken into timely monthly buckets or something else that makes sense to you, we have to line up actually cash coming in from jobs to match the money we know is going out. IT IS A TIMING THING. Expenses are neat and clean because they mostly occur monthly, quarterly, or annually. Income usually comes in two week increments. That means the paycheck can arrive at awkward times and some months you’ll get 3 paychecks rather than 2 (26 checks over 12 months). If you can live on two paychecks per month, that extra paycheck twice per year could be surplus and stay in the cask. Here is a key. IF POSSIBLE, SAVE THE EXTRA PAYCHECKS. My simple answer for aligning uneven money coming into the cask with the flow out through the spigot is to have the equivalent of one extra paycheck always sitting in the cask. Then you don’t have to get real clever with your expense payments. Of course you can also plan using exact days for inflows, exact days for outflows and spend hours trying to balance everything. There is the risk that the time required for this last “finite” balancing might jeopardize potential romance. You decide!
You should now have a budget for 3 months showing all flows from the cask and your own clever way of pouring new cash into the cask over that same period of time. You’ve got to achieve BALANCE OF INFLOW AND OUTFLOW ON A MONTHLY BASIS.
I think Debs gets paid every two weeks as does Chris and Margaret. Kelly has a varying income stream and I think Jenny’s is every two weeks. I don’t know of any monthly salaries. Monthly salaries are easy.
I don’t feel I explained the timing of inflows very well so if you need more, let me know.
Fill up your casks.
Love
Dad (Just Chas.)