Organize Your Finances – Plan

Many of us of us struggle to keep up. Often times finances are the last thing on our minds until there is a problem with them. This is part of a series of articles written to help you Organize Your Finances. As other articles come out, you can find them by clicking on the Organize category, or Organize Your Finances tab at the top.

Now that you’ve set your goals, and taken stock of your situation with a cash flow analysis, you can determine the steps necessary to accomplish your goals. You do this by putting yourself in situations that will add to your success. This might be visiting an advisor for financial help, a travel agent for information about a destination, or joining clubs and associations that will teach you what you need to know for your goal.

Financial planning really only involves 3 steps:

Figure out your goal

Access your current situation

Determine steps to get you where you want to be.

Most people just save and wait until they’re a few years from retirement and then ask me, can I retire? Planning gets you headed in the right direction right from the start. A basic example would look like this:

Goal - Retire in 8 years at 67 on $65,000/yr income

Current Situation – Investments, $500,000

Steps – To Be Determined

You could retire at 67 under this scenario if you had $1 million in investments and social security. In order to do this have to save about $22,000/yr and earn 6%. This would give you a little more than $1 million at 67. Using the general 4% withdrawal rule of thumb, you could expect $40,000 income from $1 million dollars (1,000,000 x 0.04 = $40,000). Social security income of about $25,000/yr, plus $40,000 income from a $1,000,000 investment portfolio should, in theory, give you $65,000 worth of income in retirement.

This is an overly simplistic example. The 4% withdrawal rule of thumb is based on research that suggests a 60/40 stock to bond portfolio, which in theory should give you the $40,000 income over about 30 years. Factors such as inflation, investment returns, and even increased life expectancy can alter your plan. So it’s important to revisit your plan every now and then.

The more factors, the more complicated your plan. When to take social security, IF you have pension income, what your spending habits are, all can change your outcome. But it’s still better to have a plan and change it, than to wait until you’re 66 and ask “can I retire?”

You can find some basic planning software online at Bloomberg, FINRA, SmartMoney, and many others.

About the author

Richard T. Feight, CFP®
Richard T. Feight, CFP®

Among independent financial advisors, Mr. Feight is one of the most well known and highly respected “Fee-Only” financial planners. Since 1997, Rich has dedicated his career to offering low cost “Fee-Only” comprehensive financial planning and investment advice. Rich assists his clients in organizing their finances so that they can retire on time.Rich is a graduate of Michigan State University where he received his degree in Finance. Rich has earned the Certificate of Financial Planning from The College for Financial Planning in Denver , Colorado that was comprised of intense graduate level classes grounding him in the various foundations of financial planning. He is a CFP® (Certified Financial Planner®) since 2001, meeting the experience, education requirements and passing the two-day, 10 hour exam, making him one of the few in the country who hold the designation. Since 2003, Rich has subscribed to the stringent and mandatory annual educational hours, experience, and code of ethics to meet the requirements to be a NAPFA Registered Financial Advisor. Out of the 800,000 individuals in the country who claim they are financial advisors/planners, fewer than 1,300 in the country qualify for the membership; Rich is one of them.

Rich is the President of the Financial Planning Association (FPA) of Michigan . The FPA of Michigan is one of largest and influential chapter in the country. Rich was recently named President for Transportation Toastmasters Club 4776 downtown Lansing . He has been quoted in both local and national media from Noise Magazine to CNBC, and Bloomberg, and industry news publications such as Investment News and Financial Advisor Magazine. Rich enjoys public speaking and has spoke at industry educational meeting, high schools, and executive investment clubs, AARP conferences, and business educational seminars for companies looking to educate their employees. Rich views his role as a Fiduciary for his clients as the single biggest key to any planning relationship and strives to provide the most competent, unbiased and objective advice in the financial planning profession today.

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