All of us have a subconscious financial bucket list of things we want to accomplish. After having meetings with thousands of clients collectively over the years, we have a pretty good sample size of the biggest checklist items people would include on their financial to-do list. Now it’s Chad’s turn to share reflections on his 40th birthday. While Mike looked back highlighting lessons he’d learned, Chad looks forward describing the biggest bucket list items people hope to reach on their lifelong financial journey. Everyone has different things they worry about or financial goals they are trying to achieve. On this episode, we explore what really gets people excited about financial planning.
When Should You Retire?
Most people have entertained thoughts about retiring early. It’s a dream for many when starting out. That’s because it’s rooted in having the financial freedom to spend your time as you choose. To retire early you need to understand what you spend, what you save, and how your investment portfolio should be allocated as a result. But many people don’t realize what they’re spending. Additionally, when considering an early retirement, it’s important to understand the best way to withdraw your money from a tax perspective, an appropriate disciplined investment strategy, and how to best tackle health insurance. Running scenarios for how your future could look will help you decide if you can retire early.
Elevating Milestones Along The Way
How do you balance delaying gratification and celebrating achievements? Many people pencil in becoming a millionaire near the top of their bucket list. Despite being an arbitrary number, it’s one that is concrete and still a significant symbol of consistent savings over a working career. If you’ve ever read The Millionaire Next Door, you know the simplest way to reach this goal is to live below your means. Simple advice but difficult execution. That’s because, you have to miss some opportunities now to enjoy rewards later. But by delaying gratification, you free up more to invest in your future. Good news is you can sustain your momentum by celebrating milestones along the way. According to the book, The Power of Moments, elevating smaller milestones on the journey can speed up your progress. Doing an annual review, to acknowledge and celebrate your savings rate, may nudge you to bump it by an extra 1% for the next year.
Taking a Life-Changing Vacation
Not sure the “bucket list” idea would exist if it weren’t for vacations. Thinking, planning, and sharing the trips we hope to take gives color to financial planning in unforgettable ways. Are you able to spend whatever you want on a vacation without guilt or worry? Stewart Butterfield, the creator of Flickr and Slack, shared a great definition for levels of wealth related to vacations in a recent episode of the podcast How I Built This. Many clients rely on a financial advisor to give an objective third-party view of how much they should spend on a vacations. When talking through this with clients, we set up a customized yearly cash-flow plan that helps you see the longer-term effects of your vacation dreams. As we discussed in previous episodes, lasting experiences hold great value of their own, especially when planned for appropriately.
Eliminating the Mortgage
Searching for security creates a wave of emotions when dealing with money. For many, this manifests in the desire to pay off their mortgage. So many feel that true financial independence can only come from living completely debt free. But before you write that check to pay off the mortgage you may want to think twice. Could it be a good financial move to keep a mortgage even if you can pay it off? You have liquidity and equity even if you do carry a mortgage. If you are going to pay it off, you need to think first where the money will come from. Sleeping better at night is good rationale, but shifting the perspective slightly could provide similar peace of mind. Understanding the long-term effects of your mortgage, will arm you with the necessary information which could limit anxiety and provide peace of mind without paying off your mortgage.
Outline of This Episode
- [3:27] 5 financial goals people have
- [4:20] Retiring early
- [7:40] Understand how much tax diversity you have in your accounts
- [8:19] Have a disciplined investment strategy
- [9:35] Health insurance
- [12:02] Becoming a millionaire
- [18:18] What about vacations?
- [22:45] Becoming debt-free
- [25:17] Creating a legacy for your children
Resources & People Mentioned
- BOOK – The Power of Moments by Chip and Dan Heath
- BOOK – The Millionaire Next Door by Thomas J. Stanley
- PODCAST – How I Built This – Stewart Butterfield
- Episode 57 What Happens When You Have No Estate Plan?
- Article – Beware the Tax Cliff With Health Care Premium Credit
- Article – How Old is Your Estate Plan?
Connect With Chad and Mike
- Connect on Twitter @csmithraleigh@TeamFSINC
- Follow Financial Symmetry on Facebook