savings goals

The Doing Gets Things Done: We Are Planning for the Plan!
photo shows a person in silhouette jogging up a hill toward a flag

Many things are made by combining some of this, some of that. In our work with you, for example, we combine some information about your life now with a vision to get us ready for the future. Here as another new year begins, our thoughts have turned to plans and planning—and the nuances therein.

A typical New Year’s resolution is a sweeping, major goal: write a book, finish a 5k race, lose this many pounds. They tend to skip a few steps. It’s about the accomplishment, not the accomplishing.

But it could be more effective to plan a tiny step, something to execute now.

Write a page.

Walk around the block.

Eat a nutritious meal.

And if we focus on accomplishing a tiny step, then another, then another, those steps may compound into major accomplishments.

You might recognize the idea at the heart of this formula: habits are the practical foundation in shaping the person we want to become. Writing one page, then another, then another. If it becomes a daily habit, you may end up authoring a book.

Likewise, it’s easier to save something every payday than it is to worry for years about the fortune you will require for retirement. We can invest by automatic monthly deposits, for example, instead of having to think about it every time.

When we can make our habits automatic, they become a lot easier to maintain. (We don’t stop and question whether and how and when to brush our teeth each day, right?)

The planning moves you closer to the plan; the doing gets things done. Wisdom? Nonsense? You decide.

When you are ready to work on your plans and planning, we’ll be happy to talk with you about the steps that may help you get there. Email us or call.

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What Do We Mean by "Plans" and "Planning"? – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

If I Had a Million Dollars…
photo shows a road through a wooded area with "RETIREMENT" painted in yellow on the pavement

It’s a premise we’ve heard in songs and any number of written works. “If I had a million dollars…” It’s a great prompt—sometimes serious, sometimes humorous. I’ve decided to take a crack at my own entry into the million-dollar discussion!

I had the privilege recently of meeting a young person who shared their goal of retiring at age 30. I was struck by the ambition, shared by many in the FIRE movement: its mantra is “Financial Independence, Retire Early.” So here I am thinking about a million dollars. What I have to say is all about the numbers. Money and numbers are how we fund the life in which we act out our values, plans, and dreams.

Wondering what it takes to retire early? It’s not a universal formula, but we can take the idea of accumulating a million dollars of invested capital as a decent proxy. In this scenario, one has to be able to imagine someday living on, say, a $50,000 a year. But it also requires a willingness to endure the ups and downs of ownership. They are just part of any long ride in the markets. (And keep in mind it would take a far bigger number to retire on today’s low interest rates on stable forms of money!)

Two factors really affect the path to retirement. One is how we spend and earn along the way; the other is inflation.

First, because financial independence is all about our resources exceeding our needs—income exceeding outflow—reducing your needs is one way to get there sooner. The other side of the coin is finding ways to maximize your human capital in these working years, getting paid more for your labor. So the first best investment might be in yourself to improve your earning power. Fewer expenses, more income—more money to invest for retirement.

Second, inflation will affect how the path to retirement unfolds. Inflation risk is the extent to which our money loses purchasing power over time, so we have to take that into account as we plan for our future spending in retirement.

So let’s get back to the numbers. How much money would we need to invest each year in order to have $50,000 (in today’s dollars) as annual income in the future?

Let’s assume 3% inflation and 9% investment returns—neither of which is guaranteed—and 5% annual withdrawals in retirement. Starting from zero, we could be…

  • retiring in 7 years by investing $129,782 annually ($10,815 monthly)
  • retiring in 15 years by investing $51,529 annually ($4,294 monthly)
  • retiring in 25 years by investing $23,999 annually ($2,000 monthly)
  • retiring in 35 years by investing $14,349 annually ($1,196 monthly)
  • retiring In 45 years by investing $6,982 annually ($582 monthly)

These numbers are just one way to slice it. If you could live in retirement on $25,000 of today’s dollars a year, for example, take those amounts above and cut them in half. If you would want $100,000 a year, then double the figures.

We don’t know the future, and these calculations are not the future. But it’s a place to start toward a plan.

Clients, if you want to sort out your situation—or help a younger person get started—email us or call.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

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Play the audio version of this post below:

If I Had a Million Dollars… – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

Sinking Fund, for the Win (Again!)
photo shows jars full for coins with labels for things like travel, education, house, etc.

Some time back, we wrote about the benefits of a “sinking fund” to make for a smoother life, financially speaking. This is a way to set aside money systematically for unpredictable-but-likely expenses, long-range spending plans, and lumpy annual expenses. (When businesses or other entities use sinking funds, it’s usually to lower the level of debt over time.)

My home is (was?) in good shape, but I knew maintenance and repairs were bound to be needed. Furniture and appliances do not last forever, either. My vehicles are in good shape, but someday I will need to pay for a new one.

To meet these needs and more, I arranged an automatic deposit into my brokerage account each month, calculated to—hopefully!—handle whatever might come up.

So far, eight monthly deposits have been made. And wouldn’t you know it, an unexpected home expense has hit.

It might have been the air conditioner or a washer or a dryer. Termites could have popped up or the insurance deductible for storm damage. But the money in my sinking fund can be spent on what is needed, when it is needed.

I don’t know precisely how much it is going to take to fix the problem, but the important thing is that it won’t stress me: the sinking fund has more than enough to cover the issue. Next year when I think about replacing some windows, and many years from now when the roof needs replacing, I’m sure I will feel the same way.

The examples mentioned here aren’t exactly emergencies, but they are sudden. They are part of the fabric of modern life. If you own a home or a car, if you have one of those fragile human bodies, if you live somewhere weather happens… this fund may help you avoid tapping into your emergency fund or resorting to expensive credit to cover something that always could-have-been coming.

So one of the best things about the sinking fund is that I spend less time worrying about the sudden expenses the fund is intended to cover. It took just a bit of thought to set up, then it flies on autopilot. I review it from time to time, and I can always adjust the monthly deposit.

Clients, if you are ready to talk about reducing the stress of unexpected expenses in your life, call or email us.

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Play the audio version of this post below:

Sinking Fund, for the Win! (Again!) – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

Small, Boring, and Extraordinary

We talk a lot about plans and planning. Your goals, your situation are at the center of our work. And they have to be: that’s the whole point.

But you didn’t become the best clients in the whole world overnight. It’s been a journey of change for us and for you. So how did we do it? How did we build relationships where we can navigate change, monitor the conditions around us with clear eyes, and adjust when needed?

We didn’t leap off any cliffs together. We didn’t burn it all down. We didn’t do anything drastic. “Rome wasn’t built in a day,” the saying goes—and neither is a solid financial life.

We don’t look at a goal—retirement, for example—and expect that one big, amazing deal is going to land a pot of gold in our laps. But we also aren’t going to scratch our heads and wonder how we’re going to magically produce that pot of gold.

Creative Julia Cameron explains, “When we allow ourselves to wallow in the big questions, we fail to find the small answers.” (In fact, her book The Artist’s Way is all about showing up every day, putting in the work.)

Good work often means doing the small, boring bits—over and over. We show up for work. We make sure our savings plan gets executed every payday. We reevaluate our holdings as conditions change. We read, research, and chat.

Clients, our partnership is not a series of grand gestures. But it is a series of respectful connections. As Cameron would put it, it’s about “respect for where we are as well as where we wish to go.”

That is how we grow, together. And we actually think the small, boring moves can build something pretty extraordinary.

Please, write or call when we can be of service.

Special Relativity

© Can Stock Photo / Alexis84

A friend wrote to me recently about the two kinds of time. The time that gallops onward in an undistinguished blur, versus the time that resolves itself into perfect crystal moments that stretch on to forever. Haven’t we all had those kind of peak moments?

We seem more prone to the ‘undistinguished blur’ sort of time as the years go by, and routines get set. Perhaps breaking the routine, new experiences, are what sets those forever moments apart.

My friend concluded that if there is a secret to keeping time in a bottle, it must involve moving forward – a special kind of special relativity. This notion has some interesting aspects, including one that bears on our work for you, I believe.

Many financially independent retirees have noted that they spent much time when younger worrying about having enough money in later years. Then, when they get there, they discover that money is abundant, compared to time, which is finite.

If we spend our working years on a treadmill of accumulating a fortune for enjoyment way down the road, perhaps we live life in a routine, in which time is an undistinguished blur. This shortens the subjective experience of our lives.

Alternatively, we can work to understand and perhaps moderate what “enough” means, and balance living in the moment against our longer-term objectives. Would this leave us open to more new experiences, new ways of thinking and being, and that sense of moving forward that might bring about more of those ‘forever’ moments?

Hey, I don’t know either. But I’m in favor of more special moments, and less undistinguished routine. Clients, if you would like to talk about this or anything else, please email us or call.

Hammer or Pliers?

canstockphoto14054970

Recently a client asked us a common question. With a little room in the budget, should more money be added to retirement savings, or a regular investment account? Which one is better?

Of course, the answer depends on the situation. In the early and middle career stages, one might not put funds to be used before retirement into a retirement account. Saving for intermediate term goals like buying or trading homes, or buying a boat or camper, perhaps should be done outside of a retirement account.

But getting it down to fine points, some retirement plans have provisions for using money before retirement without penalty. We believe you can gain an edge by paying attention to the fine points. We like to outline all the alternatives so you can make a good decision.

On the other hand, money to be devoted to growing the orchard – a pool of capital that you may someday live on – should almost always be sheltered from taxes, if possible. This typically means into some form of retirement plan. The tax advantages may make a big difference over the years and decades ahead.

And retirement plans come in different flavors. Individual retirement accounts, employer plans of various kinds, Roth… there are many options.

Just as one cannot know whether the better tool is a hammer or a pair of pliers, one cannot know the best way to invest without understanding the job the money is supposed to do for you. That’s why we talk back and forth! You ask us things about our area of expertise, we ask you things about yours. A meeting of the minds is just the thing to make progress, with a collaborative process.

Clients, if you would like to talk about this (or anything else), please email us or call.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.