Section I - Lesson 5
Financial Plan - How To Visualize Results
Before we finish with this section about your financial plan, which is intended to provide you with an overview of the wealth building process, it's important that you do this exercise in visualization.
As human beings, we always benefit by being able to picture ourselves succeeding at any given activity before we actually do it. We picture ourselves accomplishing a project before we even start. We draw up plans and blueprints. We imagine ourselves swinging a golf club or doing a dance movement before we actually try it.
In keeping with this line of thought, I'd like you to do something before you proceed to the summary of this section. I'd like you to print this page right now, using your browser, so you'll have the instructions I'm about to give you, and then click the Financial Calculator navigation button to the upper left of this page, so you can do an exercise.
Here are your instructions.
1) Click on cell H3 to select it, and replace the default with the total whole dollar amount of any existing 401k balance, IRA balance, and regular savings and/or investment account balance you may already have at the moment. If you have no beginning balance just enter zero. Then hit enter, which should move you to cell H4.
2) In cell H4, replace the default with your own age to the nearest birthday, and hit enter to move to cell H5.
3) In cell H5, replace the default with the whole dollar amount of your present annual salary, and hit enter to move to cell H6.
4) In cell H6, replace the default with the figure 0.12 (that is to say "decimal-one-two"). This is going to show you what to expect if you save 12% of salary on an ongoing basis. Hit enter to move to cell H7.
5) In cell H7, if you can or do participate in a 401k plan at work, replace the default with the maximum company matching contribution (expressed as a decimal such as 0.03 instead of 3%). If you do not have a 401k available to you at your present company, replace the default with a zero. In either event, hit enter to move to cell H8.
6) In cell H8, replace the default with the figure 0.105 (that is to say "decimal-one-zero-five"). This is going to show you what to expect if your money grows at the historical rate of return of the S&P 500 Index. Hit enter to move to cell H9.
7) Cell H9 should show a default retirement age of 65. Leave this alone for the moment.
In cell H11 you will find a projected balance at your chosen retirement age, based on the figures you have just provided. It's what you could reasonably expect from following the program we have just outlined.
Before you leave this exercise, do one more thing. Change the retirement age in cell H9 from the default, to age 70 and see what a difference this makes in your balance.
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