quiet millionaire http://www.wisebread.com/taxonomy/term/8050/all en-US The Quiet Millionaire: Part 3 - Money for Now, Money for Later http://www.wisebread.com/the-quiet-millionaire-part-3-money-for-now-money-for-later <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-quiet-millionaire-part-3-money-for-now-money-for-later" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/Happy New Year 2062.jpg" alt="New Year&#039;s Celebration - Sign with Year 2062" title="New Year&#039;s Celebration - Sign with Year 2062" class="imagecache imagecache-250w" width="250" height="186" /></a> </div> </div> </div> <p>You&#39;ve figured out how to have positive cash flow (aka spend less than you earn) for now; but will you have enough money for later? Funding for future requirements, such as retirement, is crucial to financial success, according to <em>The Quiet Millionaire</em> author Brett Wilder. He states: </p> <blockquote><p>&quot;...while you may not be having a current cash flow problem paying your bills, you may have a future cash flow problem without even knowing it by not saving enough for future obligations.&quot;</p> </blockquote> <p>So how much do you need to save? I’ve created a <strong><a href="/files/fruganomics/Funding%20for%20Retirement%20from%20Julie%20at%20Wise%20Bread.xls" target="_blank" title="http://www.wisebread.com/files/fruganomics/Funding for Retirement from Julie at Wise Bread.xls">Funding for Retirement</a></strong> spreadsheet (downloadable, customizable in Excel) and Q&amp;A guide that will help you find out. </p> <p><strong>SPREADSHEET Q&amp;A</strong></p> <p><strong>What does &quot;Funding for Retirement&quot; do? </strong></p> <p>It helps you figure out how much money you’ll need to save for retirement based on a set of assumptions.</p> <p><strong>What are assumptions?</strong></p> <p>They are educated guesses about the future based on what you’ve experienced in the past or think is likely about the future. For the spreadsheet to be useful, you’ve got to make some reasonable assumptions, such as:</p> <ul> <li><em><strong>Projected Annual Needs:</strong></em> $70,000</li> <li><em><strong>Annual Growth of Investments:</strong></em> 10%</li> <li><strong><em>Conserve Rate:</em></strong> 5%</li> <li><strong><em>Inflation Rate:</em></strong> 2%</li> </ul> <p><strong>What is the &quot;conserve&quot; rate?</strong></p> <p>It&#39;s the investment rate you&#39;ll likely earn after you&#39;ve retired, when you want to conserve your assets.</p> <p><strong>How do I use the spreadsheet?</strong> </p> <p>Enter the following values into <strong>bolded cells:</strong></p> <ul> <li>Projected Annual Needs</li> <li>Investment Growth Rate </li> <li>Conserve Rate</li> <li>Inflation Rate</li> <li>Your Age Now</li> <li>Your Age at Retirement</li> <li>Your Balance Now </li> </ul> <p>Everything else is calculated for you. The most relevant number is the <strong>PAYMENT needed TO REACH your targeted BALANCE.</strong> </p> <p>The schedules are just for fun. They show 1) how your investments will grow over time and 2) how you will use your investments in retirement. I put them together to check my calculations. </p> <p><strong>Can &quot;Funding for Retirement&quot; help guide my financial planning?</strong></p> <p>Yes, but mainly it is a <strong><em>tool</em></strong> to give you an idea of how much you should be saving each year. And, you can play &quot;what if&quot; by changing assumptions (see how investment rates can dramatically change annual payments needed, how one or two more years of working can help build your assets, etc.).</p> <p><em>In the spreadsheet example, if you are 30 years old, plan to retire at age 65, have saved $20,000, think you will earn 10% each year while saving for retirement and 5% each year while conserving your investments, project annual inflation at 2%, and need $70,000 per year (in today&#39;s dollars) to live, then you&#39;ll need to save $8,241 per year. Using a &quot;what if&quot; scenario, if you grow your investments 12% per year, then you&#39;ll need to save $3,923 per year; 15% growth will require only $20. </em></p> <p><strong>What if I will be getting a pension or Social Security payments?</strong></p> <p>You can adjust Projected Annual Needs to reflect your additional needs only (projected annual needs less annual pension or Social Security income).</p> <p><strong>Why doesn&#39;t the spreadsheet have a place for taxes?</strong></p> <p>A few reasons: </p> <ol> <li> If you funded your retirement using a Roth account (consult your tax pro for more on income and annual contribution restrictions), you won&#39;t have to pay taxes when you withdraw your money.</li> <li> You can add taxes to your Projected Annual Needs -- use the following formula: Projected Annual Needs/(1-Tax Rate); <em>as an illustration, if your Projected Annual Needs = $70,000 and your effective tax rate is 20%, then you will need $87,500 to support your planned lifestyle</em>. </li> <li> I&#39;ll be discussing Mr. Wilder&#39;s insightful ideas on tax planning for retirement in a separate post.   </li> </ol> <p><strong>Will my investments earn 10% every year for 30+ years? </strong></p> <p>Probably not. Some years, you may earn more; some years, less. Still, you can get a general idea of how investment growth will impact your portfolio value.</p> <p><strong>What is cool about this spreadsheet?</strong></p> <p>You can change the assumptions and update it every year if you&#39;d like. Also, you can download it for free!</p> <p><strong>Is there anything quirky about the spreadsheet?</strong></p> <p>Sort of -- I designed it so that you can enter retirement ages of less than 65 and up to age 70, and so that you will run out of money at age 100 (you receive the investment return at the beginning of your 100th year). Also, some cells are not used in all of the calculations so that I could offer options for retirement age.  </p> <p>Defining what you want out of life and, more specifically, your money is covered in <a href="/the-quiet-millionaire-part-1-what-is-important-about-money-to-you" target="_blank" title="http://www.wisebread.com/the-quiet-millionaire-part-1-what-is-important-about-money-to-you">The Quiet Millionaire: Part 1 - What is Important about Money to You?</a>  and an honest look at your spending habits is discussed in <a href="/the-quiet-millionaire-part-2-major-obstacles-to-financial-success" target="_blank" title="http://www.wisebread.com/the-quiet-millionaire-part-2-major-obstacles-to-financial-success">The Quiet Millionaire: Part 2 - Major Obstacles to Financial Success</a>. Mr. Wilder gives an even deeper discussion about retirement planning in Chapter 14 of his book <em>The Quiet Millionaire</em>, which I will cover in an upcoming post. (Note that I have received a copy of <em>The Quiet Millionaire</em> so that I could review the book for Wise Bread readers). </p> <p>You may or may not be able to save all of the money you need to fund your retirement this year but getting started with any money at all will allow you to begin accumulating wealth; the <a href="/files/fruganomics/Funding%20for%20Retirement%20from%20Julie%20at%20Wise%20Bread.xls" target="_blank" title="http://www.wisebread.com/files/fruganomics/Funding for Retirement from Julie at Wise Bread.xls">Funding for Retirement</a> spreadsheet can help chart your path and measure your progress. </p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/julie-rains">Julie Rains</a> of <a href="http://www.wisebread.com/the-quiet-millionaire-part-3-money-for-now-money-for-later">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/book-review-cash-rich-retirement">Book review: Cash-Rich Retirement</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/book-review-retire-on-less-than-you-think">Book review: Retire on Less Than You Think</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-online-tools-to-manage-your-money-in-under-10-minutes-a-week">5 Online Tools to Manage Your Money in Under 10 Minutes a Week</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-end-of-the-4-rule">The End of the 4% Rule?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance compound interest investment growth quiet millionaire retirement funding retirement planning Wed, 07 Nov 2007 19:28:55 +0000 Julie Rains 1356 at http://www.wisebread.com The Quiet Millionaire: Part 2 – Major Obstacles to Financial Success http://www.wisebread.com/the-quiet-millionaire-part-2-major-obstacles-to-financial-success <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-quiet-millionaire-part-2-major-obstacles-to-financial-success" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/obstacle race.jpg" alt="man in obstacle race" title="obstacle course" class="imagecache imagecache-250w" width="250" height="183" /></a> </div> </div> </div> <p>Want to have the wealth you need to follow your dreams? Brett Wilder, Certified Financial Planner and author of <em><a href="/%3Ca%20href=%22http://www.amazon.com/gp/product/0978772008?ie=UTF8&amp;tag=wwwwisebreadc-20&amp;linkCode=as2&amp;camp=1789&amp;creative=9325&amp;creativeASIN=0978772008&quot;&gt;The Quiet Millionaire: A Guide for Accumulating and Keeping Your Wealth&lt;/a&gt;&lt;img src=&quot;http://www.assoc-amazon.com/e/ir?t=wwwwisebreadc-20&amp;l=as2&amp;o=1&amp;a=0978772008&quot; width=&quot;1&quot; height=&quot;1&quot; border=&quot;0&quot; alt=&quot;&quot; style=&quot;border:none !important; margin:0px !important;&quot;&gt;" target="_blank" title="//www.amazon.com/gp/product/0978772008?ie=UTF8&amp;tag=wwwwisebreadc-20&amp;linkCode=as2&amp;camp=1789&amp;creative=9325&amp;creativeASIN=0978772008&quot;&gt;The Quiet Millionaire: A Guide for Accumulating and Keeping Your Wealth&lt;/a&gt;&lt;img src=&quot;http://www.assoc-amazon.com/e/ir?t=wwwwisebreadc-20&amp;l=as2&amp;o=1&amp;a=0978772008&quot; width=&quot;1&quot; height=&quot;1&quot; border=&quot;0&quot; alt=&quot;&quot; style=&quot;border:none !important; margin:0px !important;&quot;&gt;">The Quiet Millionaire</a></em> suggests that there are 7 major obstacles to financial success. They are:</p> <ol> <li><strong>Undisciplined Spending</strong></li> <li><strong>Materialistic Thinking</strong></li> <li><strong>Burdensome Costly Debt</strong></li> <li><strong>Taxes</strong></li> <li><strong>Inflation</strong></li> <li><strong>Poorly Structured Investment Portfolios</strong></li> <li><strong>Unforeseen, Life-Changing, Financially Devastating Events</strong></li> </ol> <p>For those starting out, #1 (<strong>undisciplined spending</strong>) and #3 (<strong>burdensome costly debt</strong>) are great candidates to tackle first. </p> <p>#3 (<strong>burdensome costly debt</strong>) largely represents credit card debt, which should be avoided and, if incurred, paid off as quickly as possible. #1 (<strong>undisciplined spending</strong>) and #2 (<strong>materialistic thinking</strong>) may have caused such debt; or, if you are like me, acquisition of basic assets (clothing to wear to work, a sofa rather than pillows for seating in a living room) on an entry-level salary. At some point, you&#39;ll move beyond real-world start-up expenses and can focus on controlling your spending and even saving and investing. </p> <p>#2 (<strong>materialistic thinking</strong>) is described by Mr. Wilder as</p> <blockquote><p>preoccupation with owning physical assets and things rather than pursuing intellectual and spiritual endeavors to enrich your life. </p> </blockquote> <p>Materialistic thinking can happen at any stage of your life but may start to intrude at the point where you can finally afford the house in a nice neighborhood with great schools, the luxury car, real-wood furniture, and tailored clothing. It&#39;s not the purchase of these items that are obstacles but rather the unending pursuit of the latest model car or newest home in the best neighborhood, which may prevent you from investing and protecting your assets. </p> <p>Consumerism has also entered a new realm. After reading Carrie&#39;s post on a <a href="/who-saves-money-when-you-pick-apples-the-grower" target="_blank" title="http://www.wisebread.com/who-saves-money-when-you-pick-apples-the-grower">day trip to an apple orchard</a> (and considering the cost of organized, back-to-nature trips I&#39;ve investigated), I&#39;ll also note that pricey <em>experiences</em> are being packaged and sold more prevalently, perhaps as a supplement to or substitute for expensive things. Pursuits, even worthy ones, can be obstacles to financial success. </p> <p>If you&#39;ve paid off your credit card debt and are focusing on enjoying the free but finer things in life, you may have time to review your spending. You are welcome to track every penny you spend but it&#39;s reasonable to track your expenses for a couple of months to detect patterns; you&#39;ll also need to add in non-monthly expenses such as insurance payments, property taxes, or car maintenance expenses. Mr. Wilder has a <a href="http://www.quietmillionaire.com/worksheets/cash-flow-planning.pdf" target="_blank" title="http://www.quietmillionaire.com/worksheets/cash-flow-planning.pdf">Cash Flow Planning Worksheet</a> (PDF) available for download in the planning tools section of <a href="http://www.quietmillionaire.com/" target="_blank" title="http://www.quietmillionaire.com/">his book&#39;s website</a> to get you started. Here&#39;s another way to break it down:  </p> <p><strong>+ Income</strong></p> <ul> <li>Amount of the check from your job (your pay less deductions)</li> <li>Earnings from other sources</li> </ul> <p><strong>- Savings </strong>(negative for cash flow but positive for net worth)</p> <ul> <li>Savings or investments paid from your paycheck or other earnings (doesn&#39;t consider payroll deductions for direct deposits to 401ks, savings accounts, etc.) </li> </ul> <p><strong>- Fixed Expenses</strong> (you can change these but it would involve a significant disruption to your life, such as moving to a new house or changing your child’s school)</p> <ul> <li>Housing</li> <li>Car Loans</li> <li>Student Loans</li> <li>Other Loans</li> <li>School Tuition</li> <li>Childcare </li> </ul> <p><strong>- Controllable Expenses But Not So Easy to Adjust</strong> </p> <ul> <li>Phone</li> <li>Internet</li> <li>Subscriptions (TV, radio, magazine)</li> <li>Transportation (parking fees, gas, bus passes)</li> <li>Utilities </li> <li>Insurance (Life, Health, Property)</li> <li>Gym Membership</li> </ul> <p><strong>- Most Controllable on a Day-to-Day Basis</strong></p> <ul> <li>Groceries</li> <li>Meals Eaten Out</li> <li>Clothing</li> <li>Entertainment</li> <li>Supplies (school, office)</li> <li>Gifts </li> </ul> <p><strong>- Big Ticket Items – To Be Planned for</strong></p> <ul> <li>Travel</li> <li>Furniture </li> <li>Appliances</li> <li>Home Remodeling</li> <li>Car</li> </ul> <p> +/<strong>- Other</strong> (add year-end bonuses and <a href="/sweeping-101-what-the-real-winners-know" target="_blank" title="http://www.wisebread.com/sweeping-101-what-the-real-winners-know">winnings from sweepstakes</a>; subtract other, miscellaneous expenses) </p> <p> When you evaluate your spending, you may see that you are:</p> <ul> <li>capable of saving more than your realized;</li> <li>not controlling your spending;</li> <li>controlling your spending on a monthly basis but not preparing for non-monthly expenses.</li> </ul> <p>Just taking a look at your finances can prompt you to consider ways of reducing unnecessary expenses. Wise Bread has some great resources for making the most of your money; many are found in <a href="/topic/frugal-living/food-and-drink" target="_blank" title="http://www.wisebread.com/topic/frugal-living/food-and-drink">Food &amp; Drink</a>, <a href="/topic/frugal-living/diy" target="_blank" title="http://www.wisebread.com/topic/frugal-living/diy">DIY Projects</a>, and <a href="/topic/frugal-living/health-and-beauty" target="_blank" title="http://www.wisebread.com/topic/frugal-living/health-and-beauty">Health &amp; Beauty</a> on the Frugal Living channel. </p> <p>When you start to generate positive cash flow, then you can start saving and investing. Even if you have just $25 or $50 per month extra, you can invest through a <a href="/slow-drip-into-investing" target="_blank" title="http://www.wisebread.com/slow-drip-into-investing">DRIP</a> (dividend reinvestment plan), <a href="/mutual-funds-for-wise-bloggers" target="_blank" title="http://www.wisebread.com/mutual-funds-for-wise-bloggers">mutual funds</a> including <a href="/socially-responsible-investing-goes-green" target="_blank" title="http://www.wisebread.com/socially-responsible-investing-goes-green">green funds</a>, or stocks using <a href="/stock-investing-online-sharebuilder-vs-discount-brokerage" target="_blank" title="http://www.wisebread.com/stock-investing-online-sharebuilder-vs-discount-brokerage">ShareBuilder</a> or an online brokerage account. As you accumulate wealth, you&#39;ll start being concerned about #4 (<strong>taxes</strong> incurred from the sale of investments), #5 (<strong>inflation</strong>, are your investments giving you a return above inflation?), and #6 (<strong>poorly structured investment portfolios</strong> as protecting wealth can be trickier than accumulating it). All along, you&#39;ll need to consider #7 (<strong>unforeseen, life-changing, financially devastating events</strong> -- some of which can be made less financially devastating through the purchase of insurance coverage for <a href="/choosing-life-insurance-term-or-permanent" target="_blank" title="http://www.wisebread.com/choosing-life-insurance-term-or-permanent">life</a>, <a href="/health-insurance-costs-too-high-alternative-not-pretty" target="_blank" title="http://www.wisebread.com/health-insurance-costs-too-high-alternative-not-pretty">health</a>, <a href="/long-term-care-insurance-for-wise-bloggers" target="_blank" title="http://www.wisebread.com/long-term-care-insurance-for-wise-bloggers">long-term care</a>, and more). </p> <p>Having major obstacles defined by Mr. Wilder has made achieving and maintaining financial success seem less daunting. And, wherever you are in your path to wealth, you can keep moving along.</p> <p>Note: I was given <em><a href="/%3Ca%20href=%22http://www.amazon.com/gp/product/0978772008?ie=UTF8&amp;tag=wwwwisebreadc-20&amp;linkCode=as2&amp;camp=1789&amp;creative=9325&amp;creativeASIN=0978772008&quot;&gt;The Quiet Millionaire: A Guide for Accumulating and Keeping Your Wealth&lt;/a&gt;&lt;img src=&quot;http://www.assoc-amazon.com/e/ir?t=wwwwisebreadc-20&amp;l=as2&amp;o=1&amp;a=0978772008&quot; width=&quot;1&quot; height=&quot;1&quot; border=&quot;0&quot; alt=&quot;&quot; style=&quot;border:none !important; margin:0px !important;&quot;&gt;" target="_blank" title="//www.amazon.com/gp/product/0978772008?ie=UTF8&amp;tag=wwwwisebreadc-20&amp;linkCode=as2&amp;camp=1789&amp;creative=9325&amp;creativeASIN=0978772008&quot;&gt;The Quiet Millionaire: A Guide for Accumulating and Keeping Your Wealth&lt;/a&gt;&lt;img src=&quot;http://www.assoc-amazon.com/e/ir?t=wwwwisebreadc-20&amp;l=as2&amp;o=1&amp;a=0978772008&quot; width=&quot;1&quot; height=&quot;1&quot; border=&quot;0&quot; alt=&quot;&quot; style=&quot;border:none !important; margin:0px !important;&quot;&gt;">The Quiet Millionaire</a></em> so that I could review the book for Wise Bread readers. </p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/julie-rains">Julie Rains</a> of <a href="http://www.wisebread.com/the-quiet-millionaire-part-2-major-obstacles-to-financial-success">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/47-simple-ways-to-waste-money">47 Simple Ways To Waste Money</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/start-with-recurring-monthly-expenses">Start with recurring monthly expenses</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-ways-staying-on-budget-can-be-fun-really">9 Ways Staying on Budget Can Be Fun (Really!)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/too-broke-to-be-frugal">Too broke to be frugal?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-dumb-ways-youre-going-to-waste-money-this-summer">9 Dumb Ways You&#039;re Going to Waste Money This Summer</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Budgeting budgeting cash flow cash flow planning quiet millionaire spending wealth accumulation Fri, 26 Oct 2007 19:36:13 +0000 Julie Rains 1321 at http://www.wisebread.com