Your life goals is the best place to start. Defining what you want in life – not where you are now but where you want to go.
First, Envision the future you want
How does your retired life look like? All your children are settled down and have their individual families and you are empty nesters with your spouse. What would you be doing by then? Maybe you envision yourself to be living with one of your children or maybe you choose to live alone. Whatever it is, visualise what kind of lifestyle you will have then. Maybe you want to live in a farm with a couple of relatives, travelling once a year abroad and being able to visit your children wherever they are once a quarter; being able to continue doing your healthy lifestyle with regular yoga exercise and visits to the salon once every 2 weeks and socialising with your “amigas” and “amigos” on a regular basis.
How many years from now will that “future” be?
Since such future assumes your children are all settled down, it also means that they have all finished their college education (which should be part of your financial plan and I will write about this in another article). Bear in mind that preparing for the “future that you want” once retired should go side by side with setting-up the education fund for your children. One cannot be set aside and wait for the other to be finished. Lest, you lose your build-up stage.
Here’s a simple template to start your mind thinking.
Start with your long-term goals…then work back what it should be in the medium term and the short term.
Know the price tag of the future you want (then assess what you currently have)
The next step is to put a price tag to the future that you have envisioned for yourself. You want to live in a farm, so when are you buying the property (if you haven’t inherited one)? How much will that cost? What investments can you make now that can provide you the passive income later? For example, you might want to build a 4-door apartment or buy a condo that will give you rental income later. Have an estimate cost to buy or build it.
The other big ticket item to prepare for will be the money you need for your daily expenses and/or the source of passive income I mentioned above. Start your mind into thinking using this simple My Personal Financial Plan template. If you want to build a vacation or retirement house 20 years from now (long-term goal), how much money should you have in 20 years? Using the template, work back how much you should have in the medium-term and in the short-term. Regularly review this.
As you may have realised by now, living the future that we want requires long-term planning that’s why the earlier you start the better it is as it affords you a growth period – the longer this is, the smaller is the amount required to put it up. You will be surprised how small an amount you need to set aside if you have the discipline to do it monthly while you are young. That’s what I call paying for the future that you want on instalment basis.
Start paying for that future now.