I found an amazing tool that will help you determine if you can achieve your lifetime financial goals. It’s called Retirement Savings Planner 2006, and at $89, it’s a fricken steal.
Do you have financial goals?
I’m a big believer in the idea that it’s important to know what you’re working towards financially.
If you don’t sit down and decide how much money is enough, you’ll just work yourself to death always believing that financial freedom (and happiness, to some extent) is just around the corner.
Instead of aiming for a salary of $200K per year (or some other meaningless number), it’s important to figure out what you want to buy or own. I know it sounds pretty materialistic, but it’s really important.
For instance, Gill (my wife) and I really want to be able to afford our dream home in five years time. I know how much that is going to cost so I’ve set that as one of my financial goals. We also want to own a vacation home in the USA, so I’ve set that as another financial goal. Some other goals we have include putting our (future) kids through a good college, retiring at 55, starting a charity, and a few other fun things.
Ignorance is not bliss
Setting exciting financial goals can be fun, but it needs to be firmly rooted in reality. This is where that software comes into play.
Here’s basically how it works:
- Enter in your basic details: retirement age, amount you can invest per year, current savings/investments, expected rate of return (we always use 5% to be safe) and a few other bits and bobs
- Enter in expected cash lump sums: sale of company, sale of house, etc
- (This is the important part) Enter in “Special Expenses”: Down payment on your dream house, college fund, etc
Then you get a wonderful (or depressing) graph about whether or not you can achieve these financial goals before you die.
This is the most important financial exercise you will do all year. Now that I’ve done this, I have a real clarity about what we want to achieve and when it will happen.
I encourage you to do the same – you won’t regret it.