No one likes uncertainty, but as these recessionary times grind on, uncertainty is the one constant we are living with. Families are retrenching and conserving - coping the best they can. Regretfully, some unfortunate individuals and their families are facing hard times and have had to turn to public assistance rolls, forcing an upward budget increase of more than 30 percent in one year. No one can truly understand how it impacts pride and spirit when one has to ask for financial help after working independently all your life - until it happens to you.

Capital markets have been on the upswing, but signs of a pull-back are entering the picture. Will the rally be sustained long enough to bring portfolios and pensions back to positive territory, or at least enough to give us a lift?

Interest rates are still hovering slightly off the ground. Savings rates are in the doldrums too, yet the pure cost of living is still rising, ever higher and higher on this little isle.

Uncertain financial environments are particularly tough on retirees. Their time horizon has narrowed, but the impact on their savings is very broad. They may have accepted that it is appropriate for them to retire. Alternatively, they want the option to remain in the workforce, but may be turned out, casualties of budget cuts and cost trimming as businesses go to survival mode.

For instance, older workers in the United States are being made redundant in higher proportions than younger employees, throwing these reluctant retirees onto the Social Security lifeline. For the first time in United States Social Security history, the Trust Fund paid out more in social security benefits than it received in employee deduction contributions. Looking closer to home, what is the health of our Old Age Contributory Pension Fund? How much of an impact on Financial Assistance has yet to be realised?

Uncertainty runs parallel with its cousin anxiety. The two emotions can produce a paralysing effect, to the detriment of the positive side of the equation, becoming more proactive. Instead of worrying if you will run out of money, spend some time to review your finances.

We can never control all the events in our lives, no matter how carefully we plan. We can review where we are, and try to estimate where we will be financially year by year by using a simple calculator to project our expenses, cost of living and income receipts.

Try it out - you can use a spread sheet or a pencil, pad, and inexpensive pocket calculator. Any proactive planning will help you feel in control of your personal finances; knowing where you stand will relieve some of your anxiety. Send me your questions if you get bogged down. If enough readers are interested, I will break the entire process down in the next article. Let me know.

Here we go:

Calculating your income -

You can do this monthly or annually, depends on how energetic you feel.

Lines 1, 2 and 3 are easy. Everyone knows what their incoming cash is. Why is it going up each year? The payments are increased by government to keep up with inflation (not really), while we assume if you do have a rental unit, you will raise the rent as well. Notice that the annuity on line 3 does not increase - that payment is fixed, thus each year it is worth a bit less.

Line 4 and 5, hopefully you can continue to work. I've kept it very part-time, but you may be far luckier - put your actual net paycheck(s) income in there.

Line 5 - Other income is for pension savings deducted from your paycheck or other part-time work etc.

Line 6 - add those numbers up. This is your total annual income projection!

Line 7 - annual expenses - everyone hates trying to figure out how much they spend. Sometimes the easiest way is to just add up all the debits in your bank account statements. That method picks up all those ATM withdrawals you have no idea what you spent that money on. Don't forget to include your paycheck deductions - that's where your health insurance and payroll tax are taken out. This is money you do not get back. Once you have an amount that you think is pretty accurate, notice that each year that amount goes up. It has to - inflation is eating away every day at your purchasing power. I've used five percent inflation, but many items, including health insurance are rising annually at a considerably higher rate.

Line 9 - Subtract your expenses from your income. Is it a negative number? This means you will have to use some of your savings to get by. Leaving you with less capital at the end of the year. Multiply the first year end capital of 93,550 by a three percent savings rate and bring it forward as Accumulated Savings for Year 2.

Carry through each year using the same method. You can change the inflation rate, the savings rate if they start to go up, and so on. Often, I've found that people are shocked when they realise they are outspending their income. If you do this exercise on a monthly basis, it will give you far greater control than you have now. You see, it is within your power to do one or two things. Earn more, or spend less. Which ever you decide, at least you will know where you are!

Martha Harris Myron, CPA, CFP(US) TEP(UK) JP- Bermuda is an independent fee-only cross border planning specialist in investment, tax, estate, and strategic retirement planning services for Bermuda residents with cross-border and multi-national connections, internationally mobile people and US citizens living abroad. For more information, contact martha.myron@gmail.com or 296 3528.