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.
Caleb ELston
January 30th, 2007 at 2:57 am
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Great Post! Thanks Ryan. I love the new blog design, consolidating all your major blogs in one place, very smart.
Rob Smith, Blockquote
January 30th, 2007 at 6:46 am
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Ryan, it’s a piece of PC Software! I have come to expect Mac from you all the way! I agree however that you need a clear goal to be able to know what you want to achieve in finances as well as everything else
Ryan Carson
January 30th, 2007 at 7:20 am
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Thanks! :)
You’re right. I run it through Parallels.
Ben Sauer
January 30th, 2007 at 9:46 am
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Global warming? What global warming?
Ryan Carson
January 30th, 2007 at 10:03 am
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Not sure I follow ya Ben …
Ben Sauer
January 30th, 2007 at 10:08 am
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Sorry Ryan: dumb joke about having a holiday home in the US. I’m pretty against flying all over the place, but then I suppose I’m sponsoring it by being a customer of yours, and thereby paying for speakers to fly everywhere. I hold my hands up as a hypocrite!
Thanks for all these posts, they are very useful.
Ryan Carson
January 30th, 2007 at 10:11 am
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I’m American, so there’s a good chance that we’ll live over there at some point - not planning on jetting back and forth every couple months! :)
Armen
January 31st, 2007 at 3:44 pm
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I see where you’re coming from Ryan, but doesn’t it seem rather shallow, especially when your/our goals are waaayy above what the average human on the earth can ever experience?
I don’t mean that we shouldn’t try and achieve financial contentment, but sometimes things don’t seem to add up in the world, e.g. spending $89 on a piece of software to ‘help’ us see whether we can hit our financial goals, when millions barely earn that after working for a full month!
Don’t take this as an attack at you Ryan, it was just a few thoughts that came into my head while reading your post. I just decided to share them.
Ryan Carson
January 31st, 2007 at 3:53 pm
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Hi Armen,
Thanks for sharing. I never meant to imply that financial goals should be the most important goals in your life.
I disagree with your logic though. Simply because we’re fortunate enough to have material possessions, doesn’t mean we’re vein for enjoying them or increasing them. In fact, this material wealth is a powerful way to help the needy.
Just look at what Bill Gates is doing with his vast wealth (giving to charity) … and I guarantee that he’s had a hard look at his financial goals and done financial planning!
Armen
January 31st, 2007 at 5:25 pm
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Indeed it is not always vain to seek material abundance. However, although I think we should always strive to earn more, we should probably keep tabs on what motivates us.
As for Bill Gates, well I wonder about him sometimes. I mean I can’t judge, but his foundation states right on its own website that it supports International Planned Parenthood Federation and Population Action International.
Gates would therefore appear to be an elitist and it would seem when one looks a little deeper, that he would rather see poor people kill themselves off through abortion, contraception and sterilization than actually improving conditions in Third World countries.
Tom Markiewicz
February 5th, 2007 at 11:59 pm
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This functionality has been part of Quicken (Windows versions) for a while now. It may not offer everything, but from what I can see the same functionality is there for less money as part of a larger app. Just something to look into…