Creating Your Plan

Now that you have your values in place you can begin to set goals. I want you to think of this creation as if you were planning a trip and using a financial advisor as a travel agent. First, you need to know where you are in order to find out the best way to get you to your destination. Do an inventory of your assets, liabilities, income and expenses to give you an idea of your net worth (which is your assets minus your liabilities) and your net income (income minus expenses). I will discuss later in more detail how to increase both of these.

Tell your financial advisor where you wish to go in terms of two variables, time and money. "I want to retire at age 62 and have $60,000/year in today's after-tax dollars as my income goal." In this example, if you had $50,000 already invested at age 30 for retirement, you would need to add about $1,100/month total to hit $4.2 million at age 62. This would give you $172,000/year after taxes which equates to $60,000 today. If that scares you , IT SHOULD!

I know there are some people out there who will say that you never need to save as much as advisers tell you, but I have never heard anyone say they "regretted" saving and they wish they had less money.

So find out what you need to do to hit all of your goals and hopefully you have enough in your cash flow to do all of them. If not, then you'll need to prioritize or sacrifice something today.

I believe having a financial plan is the largest factor in determining your success or failure financially. You know where you started from and where you need to be each and every year. People who have a financial plan tend to be more proactive. If they find they're a little short one year they generally try to make up for it and make certain they hit their mark annually. People with no plan tend to be reactive. They react to interest rates going up or down, the economy, the markets, politics, etc. Reacting has never been the best way to get ahead financially. So sit down today and begin to plot out where you are and your final destination. I'll do my best to give you some good advice to help you get there.