All Articles

What To Do With Your Money– What’s Your Financial Goal In Life?

What’s Your Financial Goal In Life?


This is a post in a series of posts that I’m writing on the basics of investing “How To Get Started In Investing”. On the bottom of this page you will find the rest of the posts in the series.

If someone asked you, what is your financial goal in life, how would you answer that? I think in the early 90’s I would have said that I wanted a black SL Mercedes with gold trim and a nice house up on a hill somewhere with its own tennis court and swimming pool. In the early 2000’s I would have said I wanted a bachelor pad, a nice race-car and enough money to spend on eating out and traveling. Now, I would say that I want a steady income stream from passively managed wealth to support about $3,000 of income per month. Yes, I answer it that way ’cause I’m a dork… so what of it?

It’s easier to work your way backwards. Start with your years from 65-90, then your years from 50-65, and finally your years now-50.

As a senior citizen you may want enough money to do a lot of traveling, or you may want to buy a house in another country, or you may want to just veg around in your neighborhood and volunteer locally.

As a 55 year-old man or woman (or whatever else) you may again find yourself to want to travel extensively, to move to where your kids live or to start a new career. This age range is when a lot of Americans find themselves in the empty nest situation. This can create all sorts of freedoms and increase in expenses.

Your years from now until age 50 might be when you are hoping to pay off your student loans, pay off the gambling debt, get that hair-transplant you always dreamed of and pay off the house you live in. Or it may be to purchase a few real estate investments. Or it might be to build up your current side business (or medical office) to the point of being able to sell it.

So you see, the lifestyle you want is closely tied to your financial goals. If you are going to be living a lavish spendy life you may need a lot of savings to be able to support it. If you have business(es) and real estate(s) then you may need/want to pay those off.

Figure Out An Approximate Dollar Amount

Some of us, however, have no clue about all this stuff. We don’t have any concrete plans for owning a business or buying a primary residence or real estate investments. For this group it would be best to think of their financial goals as to what is the basic necessities that they desire in order to live a comfortable and happy life. This will then translate into a dollar amount. In my example, I don’t have kids, I don’t enjoy traveling frequently and my expensive hobbies are behind me. I need $2,500/mo to live an amazing lifestyle or $3,000/mo to live like a king.

Consider The Various Expenses

You may have children so you want enough money to fund a college fund. You may want to buy a house in the next 5-10 years. You may want to eat out at a fancy place 1-2x per week. You may want to entertain at your house once a month. You may want to take a sizable vacation with/without the kids a couple of times a year. You may want to buy a new car every 5 years and finally you may want to stop working at a specific age.

Once you have this information it’s fairly straightforward to figure out how much income you need. And if you know your hourly wages then you can figure out how many hours you need to work a year to create that income and lifestyle.

Dr. B’s Financial Goals

Dr. B is married and her husband is the stay-at-home pop. They have 2 kids together. She is 35 years old with $100k of student loans, $50k saved up and just recently purchased a $400,000 home. They have 1 car between them which is paid off. They don’t take fancy vacations and they enjoy cooking at home. The kids will be going to public school and Dr. B and the hubby have decided to let the kids pay their own way through college.

Dr. B’s goals are to pay off the student loans ASAP, pay off the house in the next 5 years and save enough to retire by 55.

So Dr. B will work full-time with a few extra shifts  (except weekends) for the next 5 years to pay down the student loans and mortgage. She then will switch to part-time working at 50% to have more quality time with the kids who are older now. Her husband eventually will get a part-time job as well and together they will continue to save enough until age 55 to be able to live off of their savings.

Dr. M’s Financial Goals

Dr. M is single with no kids. He wants to buy a nice condo in an urban community in the next 10 years. At age 35 he has no student loans left and wants to travel extensively by age 40. He has invested $350,000 so far and knows he needs another $300k for the condo of his dreams and enough income every month to fund his travel habits. He estimates that traveling will cost him $4,000 per month. His condo will be bought in cash so he only needs to cover maintenance, HOA, taxes and insurance. He has a paid off car that he isn’t planning on replacing anytime soon.

Here is a nice and complete (click “Advanced”) house payment calculator from Zillow.

He knows he can save $150,000 every year for the next 5 years which will come out to $1.1 million with what he has already saved up. His financial adviser thinks he can get a passive income from his investments of approximately $3,000 every month. So he would only need another $1,000 to make his travel habits come true.

At $100/hr he only needs to work approximately 50 shifts the entire year which will give him enough income to cover his housing expenses along with the extra $1,000 he needs to pay for his travel habits. Oh, what a life!

Dr. S’s Financial Goals

Dr. S is a divorced mom with 3 children. She is 35 years old as well and a solid worker and loves what she does. She wants to continue working for as long as her body allows her to. Unfortunately, she doesn’t have much saved up and still has $100,000 in student loan debt. Let’s say she has $100k saved up in investments.

She loves being around the kids and though her parents help out with childcare she likes to spend as much time with them as possible. The kids all attend public school and she will assist them through college when the time comes.

She decides to buy a $400,000 house with her $100k as a down payment. Her financial goals are to pay off this house in the next 15 years, steadily save some money in her retirement accounts and create some savings that she can pass down to the kids. She isn’t big on traveling but will take a vacation with the kids every couple of years.

Her total housing expenses are $2,500 per month. Her living expenses total another $3,000. Her job gives her all the benefits she needs. Her full-time job provides her with a 401(k) and she contributes another $5,500 towards her IRA. Therefore, by age 50 her house and student loans will be paid off. By age 65 she will have saved $1.2 million. She would also get a pension from her job as well social security. On top of that she would have a paid off house.

In Summary

I recommend working your way backwards. If you know what you want in various stages of your life then you will know how much income you will need. If you know how long you are willing to work for and what your hourly wage is then you will know how many years you will need to work full-time and when you can drop down to part-time or per diem.

If you’re interested, see the rest of the topics related to this series of posts:

Investing Your Money – Your Pre-Tax money and your After-Tax Money

What’s Your Financial Goal In Life

Let’s Figure Out Your Budget

What Investment Options Are Actually Available To You?

Your 401k. What Is It, Where Is It? How To Access It And Change Your Investments Around

IRA Basics. How To Open One And What To Do With It

Investing Your Surplus Income, Step By Step On How To Invest In A Taxable Personal Brokerage Account

How To Monitor All These Things – It’s Much Easier Than You Think

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.