How Much Money Do I Need to Retire? or What’s My Number? Part 9
There are a few more things to think about as we button up our financial plan.
The next few weeks
We continue considering additional “things you should know” in our series “How much do I need to retire or what’s MY NUMBER part 9.” Much of this introduction is repeated for the sake of consistency.
Yes, I know, these next few posts may not be the most interesting ones you have read, however, we all know that there are important things we all must do that may not be that interesting. And…you may learn something along the way, so let’s dig in!
We’ve made a pass at trying to determine “YOUR NUMBER.” Depending upon where you are in life and how complicated your financial goals are, you may have been able to do that. Or let me say, you may have thought you had it. Because, you see, it’s not about just getting to the end, but about enjoying the ride and ensuring we are adequately protected along the way. So, whether you have nailed “YOUR NUMBER” or not, I want to cover just a few more important things that really need to be part of your financial life. We are going to wrap up our discussion of “YOUR NUMBER” next week. Yay! In the meantime, there are a few other things I want you to consider before we finalize your completed financial template.
Let me reiterate, and I think I’ve previously made the point, that our financial template is never truly final; it’s a living document that evolves throughout our lives. It’s a target to shoot for, a destination to drive toward. Do you have a specific target destination you want to arrive at in life, correct? That target destination corresponds with your number. That magic place where everything aligns and all your efforts come to fruition. The place where you can say, “I’ve achieved my dreams! I’m living my best life!” I want to make sure you understand that this magic place is not necessarily your retirement date. Or let me say it may not be the retirement date most people think of. For most people, the magic place is in their 60s but as you are about to see, that may not be the case for everyone.
When you were a child, did you watch the movie Alice in Wonderland? Do you remember the scene where Alice was on a path and came to a fork? She did not know which way to go. She noticed the Cheshire Cat, sitting in a tree, and she asked him, “Which way should I go?” He answered, “That depends upon where you are going.” Do you remember what she said next?…”Well, I’m not really sure…”, to which he replied, “Then it does not really matter which path you take.” This is exactly what we don’t want to have happen to you. Be confident in your decision of where you are going, and then let’s follow the proven path to get there!
Here is what we’ve covered and will cover for the next couple of weeks, at which time we will wrap up our discussion on “YOUR NUMBER” and be ready to move on:
Last week: Protecting you and your family. The FIRE Movement.
This week: The crooked path to financial freedom. Constraints. Prioritizing constrained or conflicting goals. The priority matrix
Next week: Completing the financial template
Two weeks: Review Time. This is the last discussion of financial goals before moving on to professional goals.
The crooked path to financial freedom
The path from here to there is rarely linear. There are ups and downs and periods where there is no movement at all. During the course and in the book, I discuss what this path really looks like and how staying the course, through good and bad, is often the best path forward. Click on the link in Note 1 to see a good illustration of this graph.
Let me give you an example of what I mean from my own life to make the point:
I had eight years in the Air Force when I left. I went from a mid-level position to a beginning position at my next company, and I took a pay cut.
When I was promoted from a union position into management, the company policy was that when this happened, the pay raise was X% of the pay from the position being promoted from. The problem is that because I was in a union position, I received overtime and other specialty pay. The rule, I found out after it was too late, was that the increase was based only on base pay, not total pay, which included OT and other pay, and I took a pay cut to be promoted.
Following the September 11, 2001, attacks, we were required to take pay cuts due to the company's precarious financial condition.
I was in job transition several times throughout my career. This means periods of not having a job and zero income.
While these four pay issues were unfavorable, given that I was fully invested from 2009 to 2021, I more than made up for them due to very positive gains in the stock market. Since 2021, the stock market performed poorly (2022) and then again favorably since that time. It really is a rollar coaster, but by being invested in your future, you can typically overcome the downs because the ups typically occur more often. What I’m not talking about here is retirement timing and sequence of returns during retirement, a huge issue we reserve for another time.
Constraints
A constraint is anything that slows your progress forward. Red lights and traffic jams are constraints to you getting home after work. As a process guy, I understand the Theory of Constraints (TOC) (Note 2) and how it limits my ability to complete a job. I can map out a process and identify the critical path, which is the task that will be the greatest hindrance to completing my process and thus the job. On your financial journey, you will encounter constraints, things that limit your ability to achieve financial independence. Please consider them before you encounter them and devise a plan for what to do when obstacles arise. Because…stuff happens.
Think about this…What constraints are in your path to doing what you want to do? After you answer that, ask yourself? What do I need to do to remove them? Then…Act!
Prioritization
We’ve discussed the priority matrix, and it’s a tool you can use to decide what to do when you have competing priorities. For example, should you save for retirement or pay off the credit cards? Replace an old car or contribute to your emergency fund? Go to lunch with your coworkers or eat the lunch you brought today?
We all make decisions like this every day, and most of the time, we don’t think much about them. Some decisions are small, and some are big, and again, we just go about our day, giving little thought to the decisions, their consequences, or their benefits. Most of us have never considered that there is a tool that can help us. Learning to make logical decisions, ones that support your plan, is a better path than emotional decisions that satisfy the moment.
Dave, what are you doing to me?!?!?!?
So, if you are getting confused, I can’t say I blame you. Last time, I gave you information to complete your financial template. Perhaps you thought you were good, that you had all the information you needed. Then, I throw these things in front of you, like someone putting a stick in front of your bicycle.
Of course, I have a reason for doing this! The financial journey is a challenging one for most people, and to be successful, you have to consider many factors, which cannot typically be accomplished in one sitting. Was the information I provided today something you already considered? If so, then good. If not, then we are getting closer to putting all of the pieces in the puzzle. Next week, we’ll complete YOUR financial template. Yes, we are going slow and easy because this is an important decision!
Summary
As you go about your life, it pays to always be thinking and asking yourself, “What if…?” Just this morning, I met a gentleman, nearing the end of his career, who had been fired from his longtime position. I don’t know much about him, but his comment was that he really needed a job because he really needed money. Like the Boy Scouts, we always need to be prepared “just in case…”
That’s all for this week!
How Much Money Do I Need To Retire? Part 9
Afterburner Success Partners
What’s in it for me?
We all want financial security, don’t we? Rather than leave it to chance, let’s get on a path so we can know for certain! And that’s what’s in it for you this week!
Call to Action
Have you completed your financial template? If not, do you need more time or do you need help? If you need more time, then be sure to take that. If you need professional help from a financial advisor or tax professional, then seek that as well. If you would like to work with me one-on-one, that is also a viable option. In any case, take action today!
Recommended Resources
Your financial professional, tax advisor, accountant, mentor, or family are all resources available to you. If you’re interested in working with me, please don't hesitate to let me know. Throughout the course, I use various media to motivate students to succeed. I’m going to recommend one that I usually show toward the end of the class now. Click on the link in Note 1. What are you going to do with what you have?
If you have not purchased my book, Achieve Your Dreams: A Complete Guide to Live Your Best Life consider doing so. It’s quite reasonable and will help you as you chart out your life goals. Click on the link in Note 3.
Up Next
How much do I need to retire or what’s MY Number part 10
Notes
Please note that as an Amazon Affiliate, I may earn a small commission on the sale of any of these recommended resources.
The financial independence graph: https://www.fiology.com/financial-freedom-vs-financial-independence/
The Theory of Constraints: https://www.leanproduction.com/theory-of-constraints/
Achieve Your Dreams: A Complete Guide to Live Your Best Life by David Giustozzi: https://amzn.to/3IxEFgy