Financial planning is perhaps the most important part of planning that you should do in your lifetime, not just for yourself but for your family and your loved ones.

# Spending :

How much can youÂ afford to spend?

### Watch your spending

Some of us do not watch our spending, especially when young and without dependants. But watch we must. Or we will find it hard to curb spending once we are used to a certain lifestyle. Then it becomes more and more difficult as our financial commitments increase and we get closer to retirement. We may even become desperate to increase our retirement fund and go into more risky investments to try and accumulate more.

It can be mathematically demonstrated that a person needs to work between 30 to 40 years in order to maintain the same lifestyle for twenty years after retirement. So the earlier you save and the more you save, the better for your post retirement future.

The table below shows the maximum rate a person can spend out of his income to last him over a lifetime. Income here means net disposable income, i.e. after tax and EPF deductions. Calculation assumes mortality of 75 years, standard contribution rates to EPF and growth in income and savings yield match rate of inflation.

For example, if a person starts to save at the age of 25 and plans to retire at 55 (i.e. work for 30 years), based on the assumptions stated, he would have to limit his maximum spending to 76% of his disposable income to make his savings last his lifetime. If he plans to retire five years later at the age of 60, his maximum spending becomes higher at 88%.

**Spending Limit Table**

Maximum spending rate |
Number of years working | ||||||||||||||||||||

10 | 15 | 20 | 25 | 30 | 35 | 40 | 45 | 50 | 55 | ||||||||||||

Age when you start to save | 20 | 23% | 34% | 46% | 57% | 69% | 80% | 92% | 100% | 100% | 100% | ||||||||||

25 | 25% | 38% | 50% | 63% | 76% | 88% | 100% | 100% | 100% | ||||||||||||

30 | 28% | 42% | 56% | 70% | 84% | 98% | 100% | 100% | |||||||||||||

35 | 31% | 47% | 63% | 79% | 95% | 100% | 100% | ||||||||||||||

40 | 36% | 54% | 72% | 90% | 100% | 100% | |||||||||||||||

45 | 42% | 63% | 84% | 100% | 100% | ||||||||||||||||

50 | 50% | 76% | 100% | 100% |