The Financial Planning Process For Retirement

The financial planning process is all about “planning” for your retirement far in advance of your arrival there. You need to think of retirement as a destination. I like to call it “The Promised Land!” 

While it may seem like a magical place (with margaritas) where we dream of going (someday), it’s actually going to be real. And you can’t click your heels to make it appear, right when you’re ready to retire. You have to start planning for it now.

Decide what you want your retirement to look like and by when

This step is basically you daydreaming of a blissful time in the far off future. What will you be doing in this blissful future? Golfing? Volunteering? Traveling? Hitting the bar at 10am? All of the above?

Figure out how much money it’s going to take to have that vision (from step 1) become a reality.

This is where you say to yourself, “How much money would I need to have every month (or year) at my disposal, to have this blissful future retirement scenario play out? This pool of money would include investments, income from a part-time job perhaps, or any other sources of income.

Consider what kind of investment performance you can rely on to both supercharge your savings effort, and then fund your retirement days.

So now you might be saying, “But wait, you said I should not be tapping the principal…so how do you take 4% per year, and also increase that 4% by 3% annually to keep up with inflation?”

Ok, so in this step you would want to play around with my savings rate calculator (which you access in the course, of course!). There are a lot of variables that happen in one’s life (and in my calculator), especially over the 30-45 years you will be working.

Determine how much money you need to be saving along the way, to put into your “supercharger-machine,” to accumulate that nest egg.

Start tracking your finances so you can establish a total required ongoing income to survive the trip to retirement. Then keep “tracking” them so you stay “on track.”

The reason it’s so important to track your finances is multifold. I actually wrote a somewhat humorous essay of sorts on the topic of money tracking (aka personal bookkeeping). Beyond the tracking itself, there are a few more steps involved with this stage of the planning, so that you eventually glean the information you need.

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