Hi, JJ Childers here again with another Monday Morning Mentor message for you. As we continue going through our discussion of how to formulate a plan for your finances, we take a look at Part 4 of our 5 part process. In this part, you need to make a determination of how much time you have to accomplish your goal.
If you’ve been with us over the past several weeks, you’ll recall that we first set a financial goal for ourselves of attaining a $1 million net worth. In the next step, we took a snapshot of our current situation. For our example, we presumed a net worth of $150,000 leaving us with $850,000 to go. The third part of our process was to come up with a breakdown of our income and asset resources. Factoring in a yearly income of $80,000 and overall account balances (including a retirement plan) of $75,000.
The next part of our plan is to determine how much time we have for reaching our goal. Obviously, I don’t know how old you are. Regardless of your age, however, you’ve got to determine the amount of time that you have set for yourself to reach your goal. If you’re 30 years old, some experts would tell you that you have roughly 35 years to go for attaining your goal. The truth is that you may not have that long if you are hoping to retire by age 50. If that’s the case, you’ve only got 20 more years to go. This makes a huge difference.
This part of your financial planning is critical because it enables you to make the other calculation necessary for attaining your goal. For instance, back to our assumption that you’ve got $850,000 to go to get to $1 million. If you’ve only got 10 years to make that happen, that means that your net worth has to increase by $85,000 per year. That’s a big difference when you compare it to having 35 more years to go which would only require an increase of less than $25,000 per year.
Regardless of where you are, you can get to where you want to go. One of the keys to making that happen is to determine the time that you’ve allotted for the journey.
