| Have you ever met with a financial planner? If you | | | | be exact to the penny. For example, |
| haven't, you can expect to go through a certain | | | | $5,387,234.23.You will look at the plan and you will think, |
| process. You will be asked about your financial goals. | | | | "My gosh, there is no way I can do this!" You may get |
| One of your goals will likely be that you want to plan | | | | started doing a few things that the planner |
| for retirement.You will be asked about your present | | | | recommends. But it won't last very long and you'll go |
| income. You know the answer to that one. You will be | | | | right back to doing things the way you've always done |
| asked about your expenses. That one will be tough. | | | | them.So what's wrong with the traditional financial |
| Everyone underestimates their expenses because | | | | planning process? Plenty! First of all, it's ridiculous to try |
| most of us have no idea what we're really spending | | | | to look decades in the future to predict what's going to |
| and what we're spending it on.You will be asked about | | | | be happening in your life. I don't know about you, but I |
| your assets -- what you own. You know what you | | | | don't know what's going to happen tomorrow, much |
| own, but it will be tough to put a market value on some | | | | less decades from now. |
| of it. You will be asked about your liabilities -- what you | | | | Also, traditional financial planning doesn't take into |
| owe. For most people, facing the reality of their debts | | | | account what financial freedom actually is. You're |
| is rather daunting.You will be asked when you want to | | | | financially free when your passive income (money you |
| retire. I would say the average age most people give | | | | don't have to work for) equals your expenses.So if |
| is 55 years old. I don't know why that is, but 55 seems | | | | you have no passive income right now and your |
| to be a popular number. Then the financial planner will | | | | expenses are $50,000 a year, and you can get a 10% |
| tell you that you will need to accumulate enough | | | | return on your investments, you need to accumulate |
| money to live another 40 or 45 years after retirement. | | | | $500,000 to become financially free. |
| After all, if you live to 90 or 95 you don't want to run | | | | If you can get a higher return on your money, you can |
| out of money, do you?You will also be asked about | | | | reduce the amount that must be accumulated. If you |
| your risk tolerance so that the planner can determine | | | | settle for a lesser return because you're risk averse, |
| what kind of annual rate of return to factor in for your | | | | you will need to accumulate more. You should also |
| investments. If you say you have a low risk tolerance, | | | | consider inflation. Of course, if you invest for inflation, it |
| the planner will consider low-risk investments that will | | | | will already be factored into your |
| give you a lower rate of return. If you say you have a | | | | investments.Understanding financial freedom as the |
| high risk tolerance, investments that could provide a | | | | point where your passive income equals your |
| higher rate of return will be considered. You can't have | | | | expenses is a much more realistic way to look at it. |
| it both ways. If you don't take risks, you can't get a | | | | Most people who are committed to being financially |
| very high rate of return on your investments.Then all | | | | free can achieve their goal in a matter of a few years, |
| that information will be dumped into a financial planning | | | | not decades.Copyright 2005Larry Holmes invites you |
| software program. The software will print out a plan | | | | to visit |
| that will say you need to accumulate several million | | | | Your common sense guide for financial and |
| dollars by the time you're 55 years old. Oh, and it will | | | | investment success. |