The six million dollar man
One of my favourite television series back in the mid1970s was the “Six million dollar man”.
This was about a crashed astronaut rebuilt with nuclear powered limbs and implants at a cost of six million dollars.
Back then, it was enough to buy Steve Austin a new arm, an eye, and a pair of legs with super strength and vision. How much would it cost him today? Assuming a conservative inflation rate of just four percent, Steve Austin would be called the “30 million dollar man” today!
Think back and ask yourself how much the basic things you buy today would have cost you 20 or 30 odd years ago? You won’t realise how much your money has shrunk until you make a note of the rate of increase of those prices.
The problem with inflation is that it has always been inconspicuous and inadvertently taken for granted. The real danger is the loss of our purchasing power over time without much awareness on our part.
The inflationary impact on our finances is real and can no longer be ignored. If you have 20 years before you retire and your current lifestyle costs you RM6,000 per month now, it will be more than tripled by the time you retire at an assumed personal inflation rate of six per cent per annum.
If you intend to plan for a 20 year retirement time frame, you will need a minimum nest egg of RM3 million to fund your retirement, assuming there are no further adjustments for inflation after retirement.
Having one to two million Ringgits stashed up for retirement may no longer be viable, unless you don’t mind downsizing or reducing the standard of living during your retirement years.
What can you do now? Start listing down your expenses and break them into variable and fixed costs.
There’s hardly much you can do with your fixed costs which essentially are committed expenses to keep your basic needs met. Variable costs are negotiable.
Name each of your variable cost and question them one by one whether you can reduce or remove that expense. Channel the savings instead into your retirement portfolio.
By the way, six million dollars may just have bought Steve Austin an arm in today’s monetary values.