It was a sobering situation that Tom related to me over the phone. At the age of 59, when he should have been focusing on getting ready for the fruits of retirement, he was headed out of town to start his second week of training for a new job. As I reviewed Tom’s thirty-five year financial life in my mind, I couldn’t help but think his outcome would have been very different if early on, he and his wife, Mary, had asked a simple question:
What’s Our Financial Life Goal?
For 99.9% of us, our financial life goal represents a “retirement” goal. I don’t particularly like the term “retirement” because I see a financial life goal as the opposite of retirement. Having and achieving a financial life goal (FLG) gives us choices and allows us to take any direction in our personal life we choose. That’s sounds like freedom to me; not retirement.
But, back to the question at hand: What’s your financial life goal? Sadly, most people are like Tom and Mary; they never defined their FLG. It doesn’t take a rocket scientist to determine that if you know where you are headed, your success rate is greatly enhanced.
So, here’s how you determine your FLG. Answer these three basic questions for yourself:
- How many years until I want to retire?
- How much do I need in retirement investments when I retire?
- What do I estimate the lifestyle I envision at retirement will cost annually?
The first question is usually the easiest to answer. Let’s say you are 40 years old and you target age 65 as your age to retire. That’s 25 years in the future.
The second question has to do with what you think you’ll need in your total retirement investments to live on. For many, this is a lump sum; for others it may be a combination of investments and regular payments from a retirement fund, i.e. pensions, 401Ks, etc.
In answering the third question, I recommend using your current annual cost of living. What does it cost to run your “personal business” for a year?
Here’s Joe and Judy’s FLG for their J&J Company: “We plan to retire in 30 years at age 65 with $1,500,000 in retirement investments that can be used to fund a lifestyle cost similar to our current lifestyle cost of $90,000 annually”.
(Note: For planning purposes, when using my Wealth Builder 10 Steps, income and lifestyle cost are held constant at today’s dollar value. By holding both constant, it allows you to use a simple calculation to determine and project what your future financial results will be in today’s dollars. Also, it’s important to understand the other assumptions I use in my steps. They can be found at Five Key Assumptions on my website. )
Certainly there is a lot more to wealth building than writing a couple of paragraphs. But can you imagine the momentum you could achieve by defining a realistic FLG, and then systematically developing a proven method to bring verification, accountability and adaptability to your dreams?
If you can’t, answer this simple question:
What is your financial life goal?
Commit to finding the answer.
In my book, Common Sense to Uncommon Wealth, I share in a little over 100 pages, Wealth Builder 10- Ten simple steps to building wealth the right way. Whether it’s my book or another approach built on solid financial principles, I encourage you to keep digging for the answer.
By defining and answering this simple question day in and day out in your financial life, you and your family cannot only enjoy the benefits of wealth building, but live into the true meaning of an uncommon life.
And as always, if you think this information might help someone, please forward it, or better yet, sign them up to receive my weekly blog.