I don’t think there are lazy people in the world. I think there are impotent goals. Individuals that don’t succeed, in my opinion, have goals in life that don’t “get their fire going” or inspire them. One of my favorite books is Napoleon Hill's Think and Grow Rich.” One of the book’s most useful tips for me was to create a definite major purpose, write it down, and read it both morning and night.
A strategy I challenge you to try is to not only determine what YOUR definite major purpose is, but also determine the absolute financial NUMBER you seek to achieve, and by when. For example, my personal financial goal is to save $3,500,000 in my 401k and IRA by the year 2045. I’ve elected to include this figure in my daily reciting of my definite major purpose as the mind has a very unique way of aligning behavior and performance behind definite “how much and by when” goals.
How I Stay Motivated
A habit I’ve adopted over time is keeping a running tab on my progress toward this goal. Every quarter I update an excel spreadsheet with current balances, portfolio allocation, and overall progress toward the ultimate goal of $3,500,000. Here is an example of what a portfolio worth spreadsheet like this might look like:
|Target||VTSMX -> VTSAX||60%|
|VGTSX -> VTIAX||25%|
|401k/IRA||VBMFX -> VBTLX||15%|
|Stay the couses…Age-10 in bonds/30% international|
|Annual Income (4%) Draw||$140,000|
|% to Goal||4.21%|
The S.M.A.R.T. Method
One of the best methodologies for attaining high value goals is the S.M.A.R.T. method. This acronym stands for specific, measurable, attainable, relevant, and time bound. My goal of $3,500,000 satisfies these S.M.A.R.T. requirements.
How Did I Determine Savings Goal Amount?
Because I am at least 30 years from retirement, any number I come up with is going to be just an estimation. I arrived at $3,500,000 by 2045 by trying to find out what a $50,000/year income would by in 2045 dollars. After crunching some numbers and allowing for a 3% inflation rate annually, I determined that I’d need to multiply $50,000 by 2.71 to get the income I’d need in 2045 to match $50,000 in 2012 dollars. This brought me to $135,500/year. Assuming the generally accepted 4% withdrawal rate in retirement, I concluded that a portfolio of $3,500,000 would yield approximately $140,000.
I’d like to challenge you to SET GOALS AND TRACK YOUR PROGRESS - Set realistic net worth goals and track your historical progress. Are you getting ahead or falling behind? Create a Net Worth Statement (feel free to copy mine above) and update it regularly. Take pride and satisfaction in your financial accomplishment as you see your money grow.
How do YOU use goals in your life? Do you have a “number” in mind that would satisfy your retirement needs? Please share your comments!