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February 02 newsletter
Last November we began to explore the first secret: planning for wealth. The first step in developing your plan was to think about identifying your financial goals. Then we looked at ranking the importance of each of your goals. Our last task was to understand the timing of the individual goals.
This month, we'll build on your plan and look at what is needed to quantify those goals.
As we have previously discussed, try not to get too frustrated if you think the pace is too slow. There are some good reasons for taking this programme in baby steps. Not least is that achieving your financial goals may potentially involve some lifestyle changes. Please be patient and then be rewarded.
If you haven't already started, this maybe a good time to start noting down the information you have gathered on each of your goals. A spreadsheet might be a useful tool to help with some simple calculations.
You may already have some idea of how much
money you'll need to achieve your goals. If not, now is the time
to answer that question. This requires a degree of financial precision.
It's important to commit a little time to this exercise. Quantifying
your goals will not only help you choose which goals to focus
on, but in coming months, it will also help you set some saving
targets and help you measure your successes and achievements.
So a little phone or leg work may be required.
A new car - take a walk around the local car yards,
House deposit - talk to a mortgage broker about how much you will realistically need,
Repay credit car debt - get the latest balance from the credit card statements, and
Retirement - use one of the various retirement calculators featured on web sites such as at Sorted.
Now that you have a value against each goal, we want to work out how much you'll need to save each year. To do this, simply divide the amount you think you'll need for your goal by the number of years for that goal's timeframe.
For example, if you want to save $15,000 for your house deposit and you have decided on a time frame of three years, your annual saving target for that goal will be $5,000.
The annual saving's target is the final piece of the jigsaw. You now have a complete picture of each of your goals. Next month we'll complete the plan. To do so, you'll need to use the information that you have gathered and choose which goals you want to go after.
For the record, we think you should go after all your goals. Don't be limited by your existing income level. It will all come down to attitude. Yes, eventually you may have to give up smoking or out-of-season rock melons, but for now, why not chase your financial dreams and see what happens.