By Rob Wrubel, CFP®
Do you have a dollar amount in mind that will bring you financial peace? A total number of your bank, investment, retirement accounts and other assets that lets you know you’ve “made it?” When I speak at conferences and meet with people, I get asked regularly, “How much do I need?” and “How am I doing compared to others?” Having a number in mind can help some people know what progress they’re making and can help them break down into small amounts how much to save to achieve financial success.
Financial planning involves lots of numbers and we can get lost in the detail without a clear set of goals and a strategy to get there. We start with what we want and need in the future.
The “what you want” usually has a few crucial elements – live well in retirement, provide resources for a family member with a disability and pay for education for other children. Those are common wants. You will likely have other goals and that might include buying a house or vacation property, getting out of debt, starting a business, caring for parents, travel, weddings and more. In planning, we prioritize goals, and the two first ones, retirement and creating assets to fund a special-needs trust, tend to be the most important.
Future planning for our families can take place in short bursts of activity and it helps to break down planning into chunks that can be set in place quickly. There’s just no way to try to get everything done at once and trying to do so often means nothing happens. My workshops and books highlight the building blocks of planning to give structure and pace to planning (see my books on Amazon or order at a bookstore). The purpose of the building blocks is to be able to focus on our lives today without the additional fear of the future place by visualizing goals, building financial security and protecting benefits. We don’t have to think of our numbers every day once we have committed to our plans.
Each of those goals can be given a financial target, such as how much you need to spend each month when you no longer work or how much income you want from a special-needs trust to support your family member with a disability. Once that target is decided, then we can back into how much to save and invest each month to fund accounts to provide that income. We look at other resources, like Social Security income, SSI or SSDI, pensions and other assets that provide income to help decide how much to save and how to invest it.
Each day, we have a million ways to spend our money that come screaming at us through social media and traditional media advertising and we forget about our priorities. We get a rush from buying something new and we have to make sure that desire to feel good today does not throw us off our goal of securing a healthy and enjoyable future.
Having a strong purpose for your money will help you save as you adjust through life’s changes and keep you on track for a secure future. Once you know your goals, you and your financial planner can set a savings plan and then start marking progress towards the goal.
The math is pretty simple. The math should not get in your way. Financial planners and online tools can help figure out what you need to do. The barrier to starting is usually us – we haven’t committed in our minds and hearts as we fear change and what the future will bring. We are afraid of making mistakes.
If you have yet to start, jump in. Almost every decision you make can be updated or fixed if you get it wrong (and really you probably won’t). Don’t underestimate the positive feelings you get from doing something. Part of your stress melts away when you have money in the bank, retirement accounts and other investments.
If you have started, keep tracking your progress. Meet with your planning team and review all the details. Think about that number that you want to have and celebrate each major milestone as you get closer to your goal.
Whatever you do, celebrate success. Did you save your first $1,000 into an emergency fund? Find a way to celebrate without breaking the bank. That $250 massage package doesn’t make sense yet but buying a $10 or $20 splurge does. Have that first $10,000 in a retirement account? Awesome, it’s huge progress if you just started and find another way to celebrate. As you hit milestones, look back at how far you’ve come and keep working towards that large goal. Getting $250,000, $500,000 or more in accounts takes time for most people so break your success into chunks and throw a dance party every time you hit a new level.
Planners can help you answer the question, “Am I on track?” You want to know if you are heading towards having the financial resources to live the life you want and to care for your family member with special needs. We take lots of inputs and consider risk, taxes, estate plans and investments.
Having a number in mind is a simple way to track progress. It’s not perfect, it’s not for everyone but I do like have an easy way to let me know if I’m making progress or have more work to do.
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This article is not intended as investment advice or representative of any specific investment strategy. Consult with your legal, tax and investment team before taking any action.
