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Careful planning, sacrifice can reap big rewards

Tue., Nov. 17, 2009

Retirement, financial independence, security: You, too, can have it all. You merely have to define what “it” is and be willing to forgo items of lesser importance.

Stephen Covey, who wrote the best-selling book “The Seven Habits of Highly Effective People,” has said, “It’s easier to say ‘No!’ when there is a deeper ‘Yes!’ burning inside you.”

Let’s say the achievement of the above concepts resonate with you. In order to connect deeper and provide yourself with inspiration, you must first answer a fundamental question: What’s important about money to you?

Money may allow you to feel free from stress so you can connect with your loved ones, give back to your community and reach your highest potential in life so that you are at complete peace. This is the emotional “why” to the tangible “what” of your goals. Achieving goals, in and of themselves, will not grant you satisfaction. It is the realization of your higher values that makes life worth living.

Now to the nuts and bolts: Set tangible goals that will take time and money to achieve. Name the goal (i.e., financial freedom); set a date by when you would like to have the funds available (Sept. 21, 2022) in today’s money; determine how much in after-tax spendable dollars you will need ($4,275 per month); and decide how you will feel once you have achieved the goal (free, spiritual weight lifted, ready to go!).

Benchmark your current reality. How much do you have for cash reserves? How much debt? What do you have set aside already for the goal? What risk management (insurance) tools do you have in place to protect against the unknown?

Now that you have created your personal road map, construct a written strategy with an action-item checklist for each of your goals so that you know exactly what step is next. For example: “Accumulate $2 million by saving 15 percent of our yearly income in a diversified growth portfolio.”

Modify your goals and action items as you go to adjust for reality – put off the goal until year 2032, for instance, or reduce the per month income by half.

Have the proper tools: The Internet is full of free or inexpensive resources, but be wary. Oversimplified tools may give you a false sense of security or, worse, present an overly bleak vision. (Did you forget about the equity that will build in the house?)

Finally, are you willing to be held accountable for the action items under your control? Your spouse is usually the worst person for this and your friends and co-workers just want your happiness now. Consider engaging a certified financial planner who will work with you on all of the above and more. A permission-based accountability relationship that benchmarks progress toward your goals three times a year is your best chance to stay on the right track so that no matter what happens in the market, economy or the world, you have the highest probability of achieving what’s on your road map.

John Schram is a certified financial planner and member of the local Financial Planning Association chapter.

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