How Much Is Enough For Retirement Or Emergency Funds? | How I Calculate My Monthly Expenses

Many people like to set a target of 1M dollars as the amount they need for retirement without actually confirming if it is too much or too little. If your expenses add up to $20,000 a month because you are living in a landed property with 2 posh cars, then 1M is probably going to last you only 4 years of retirement living.

On the other hand, if your monthly expenses are only $2,000, then 1M can last you 41 years of retirement living, assuming you do not need expensive medication that is not subsidized.

So how much are you spending every month?

I know it can be quite time-consuming to keep track of every single expense and they sometimes tend to fluctuate over the months.

So, I thought of a simple and fuss-free way to come out with a good estimation of my monthly expenses. I basically add up all my credit card bills and the spending on my NETS card over 6 months and then average them out.

This amount (average monthly expenses) is also good for me to gauge how much should I set aside for my emergency funds.

Credit Card Spending

There are my credit card statements for the past 6 months for my BOC Family Card:

Aug 22: $1,655

July 22: $1,206

June 22: $1601

May 22: $1,202

April 22: $1,632

Mar 22: $1,422

Total Expenses paid with BOC Family Card for the last 6 months = $8,718

I also use the Citibank Cash Back Card when I have hit the minimum spending limit (to qualify for a cash rebate) for my BOC card. The expenses over the last 6 months are as follows:

Aug 22: $878

July 22: $959

June 22: $1,452

May 22: $1,107

April 22: $933

Mar 22: $1420

Total Expenses paid with Citi Cash Back Card for the last 6 months = $6,749

I also incur some expenses on my POSB Everyday Card over the last 6 months:

April 22: $784

Mar 22: $1,334

My total spend through POSB Everyday Card in the last 6 months = $2,118

The total spend through all my 3 credit cards in the last 6 months = $18,455

NETS Card Spending

I rarely use my NETS ATM card for payment unless the merchant does not accept credit card payments. The good thing about paying using a credit card is to earn cash rebates on the spending. Therefore, the deductions off my saving accounts are mainly used for GIRO payments for income tax, insurance, utility bills, and town council S&CC charges.

Aug 22: $1,188

July 22: $887

June 22: $979

May 22: $1,063

April 22: $1,112

Mar 22: $1020

Therefore, the total expenses paid through NETS / Savings Account in the last 6 months = $6,279

Total Spending

Summing up the total expenses through all my credit cards, ATM cards and GIRO deduction, it is a grand total of $25,184, which gives an average spending of $4,197 per month.

Why Is This Figure Important?

This figure is important for the following reasons.

If I need 6 months of emergency savings, I should have at least $25,000.

If I were to lose my job, my next pay would have to be at least $4,197 per month (draw-home pay).

If I were to retire early on passive income/ sideline income, it also must be bigger than $4,197.

Lastly, if I wish to live off my savings for the next 30 years, I must have at least $4,197 x 12 x 30 = $1,510.920.

Of course, my expenses may get lesser as I get older or when I retire, I probably do not need to pay income tax anymore. On the other hand, 4.2k may translate to 5k or 6k in the years to come due to inflation. Therefore, I will use this figure for now to plan how much I really need for my family’s expenses every month.

I hope this sharing has been useful to you and can help you plan your finances and financial goals better, instead of following everyone’s target of 1M. You may need more or you may need less. If you need more, you may need to hustle more, you can check out this post for some ideas:
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If you need less, then don’t need work so hard and spend more time doing the things you enjoy before this journey is over!

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2 thoughts on “How Much Is Enough For Retirement Or Emergency Funds? | How I Calculate My Monthly Expenses

  1. To generate about 4.2k per month, the figure you need is closer to 1m if we assume it is growing at 2.5% p.a. while inflation could derail the setup, it only affects more if one is buying big ticket items, else daily expenses can be mitigated with smart and selective buying. Medical got insurance to cover. With appropriate options strategies, 2.5% overall portfolio return should be no issue. Balance generated will take care of unexpected expenses.


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