©2018 by The Relentless Finisher

Creating Your Own Financial Plan

July 25, 2019

Hey everyone! It feels good to be back and writing this post! It's been about a month since I wrote my last post and during that time it has been a whirlwind of activity. I decided to take some time off from the blog post because I needed to re-energize myself and my mind as well as focus on a few other things that I had going on. Now that it's summer and offseason, it's time to get back in the gym more and get ready for the upcoming season. I've been able to take a few trips, travel out West to train for a little bit and also ramp up the consulting work I've been doing for J.C. Baker and Associates. Since starting the blog, I've been going for 34 weeks straight and this time off has been good to refocus, come up with new ideas and directions for where I want to take the blog, and ultimately provide you guys with some fresh content and ideas!

 

For my first post back, I wanted to talk about creating your own financial plan. Why do I think this is important? I think this famous quote by the great New York Yankee Yogi Berra explains it best, "If you don't know where you're going, you'll end up someplace else." In our case when we're talking about finances, you should be thinking about what financial goals you have, what lifestyle goals you are picturing, and then researching what that number needs to be to accomplish that. While there might not be one specific exact number, having an idea of what to shoot for to achieve those two previous goals we mentioned will give you something to work towards and plan around. Now, this post isn't going to delve into specific investments set up and choosing this stock over that stock, but more of a broad approach just to get you in the mindset of this is the life I want to create, and what are some steps that I need to take to make it happen. I went through this exercise in October of this past year while I was still overseas and wrote it on October 24, 2018. To see my full detailed financial plan, email me and I will walk you through the details of how I did mine.

 

Lifestyle Goals

The first thing I did was think about my lifestyle goals and what actually brings me happiness. In doing that, I know that at this stage in my life, experiences bring me more joy than material things. Experiences with the people I enjoy spending time with is better to me then saying getting a new outfit that's all designer. Being overseas opened my eyes up to a whole other side of the world and because of that, I know I want to travel more and see other parts of the world.  I know as I get older and further along in my career, I'm going to either want to spend more time doing things related to my businesses or spend more time with my family. Because of that, I want to optimize my life around those things. So, it could mean having a personal chef, a personal assistant, having a maid to clean the house, basically outsourcing all of the daily tasks to either spend more time on business or family. I also know I'm going to want to take extensive fishing trips and learn how to play golf better. In terms of material things, I know what type of house I would like and the type of cars that I want to drive.

 

Financial & Life Goals

The next thing I did was break down some financial and life goals. I want to have at least a 50% savings rate. When I get married, the goal will be to continue that and live off of one income, either mine or my wife's and then invest and save the others. When the time comes to having kids, for every child born, buy a real estate property with 15-year mortgage so when they go to college at 18, the property is fully paid off and that money can be used to pay for their college, start a business for them, or give them a boost for life after college. And then the last thing is I want to start a foundation or charity that will give back and help impact my community.

 

After I went through that deep thought exercise, I then had to figure out how much do I think all of this is going to cost and how am I going to make it happen. Like I've mentioned previously, I'm shooting to have the option to retire at 45. Right now, that gives me 22 years to make all of this happen.

 

How Much Money Will This Take?

My next step was to research different retirement lifestyles, how much things cost, factoring in inflation, cost of living in certain areas, and see what people in retirement spend their money on and how their habits change from when they are working vs. when they are retired. I came across a lot of different numbers and because I am ambitious, I wanted to shoot for a higher number than what I found, not only because I want to enjoy a great life, but even if I don't spend all of the money, I have created generational wealth.

 

I then came up with my investment plan. My idea was that it would be a two-pronged approach comprised of both real estate and stocks. I tilted heavier to the real estate side because of the benefits of cash flow. That is something that will always be putting money in my pocket, similar to if I was getting a paycheck from a job every month and it is also a tangible thing that I can pass down to kids if they are interested or they can be the ones collecting the checks. I also recognized that you should diversify which is why I still wanted to incorporate the stocks and bond portfolio to keep me balanced.

 

From a real estate perspective, I broke it down from how many units I would need based on the cash flow that I was trying to produce. Then, I broke it down even more to how many units I need to buy each year over the course of 22 years to stay on target and reach that goal. From a stock perspective, I researched how much stocks vs. bonds you should have at each age through listening to various experts and relying on different sites and documents. I then constructed my own index fund portfolio based on more research. Because I'm planning on retiring at 45 and projecting that I live at least another 50 years Lord willing, I'm relying on a safe withdrawal of 3%-4% per year. I then wrote two scenarios where I either build a portfolio and draw it down using the safe withdrawal rate I mentioned above or create a slightly bigger portfolio but then only take out the interest and not touch the principal. The last step was actually opening a brokerage account and then executing on that plan.

 

The good thing about all this is at first, it seemed like the number I was trying to attain was out of reach. But once I started breaking it down, doing it more until I had simple steps that I could follow, that's when it really seemed attainable. While this is not a perfect plan by any means, and it isn't a very deep and detailed plan at this moment, I felt like it was a good start for me and can be a good start for many people. It doesn't include things like insurance, housing expenses, spending habits and a myriad of other things, but I feel like I'm heading in the right direction.

 

Conclusion

To end this post, I wanted to share the simple investment philosophy written by Physician on Fire. Since he had the basic framework of what goals and directions he was trying to accomplish, it allows for everything else to fall in place after that.

 

 

It feels good to be writing again and I hope reading this post sparks something inside you to write your own financial plan. If you ever need help or want to go into a more detailed deep dive of mine, feel free to reach out!

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