Goal Setting Part 2 – Financial Security


Continuing our series on setting financial goals, based on  Tony Robbins “Wealth Mastery”, today we will look at the second milestone, known as Financial Security. People have varying definitions of what it means to be financially secure, which is fine. However, if you are not sure how to define financial security, perhaps the following will help:

Financial security is not just a matter of job security or income. In order to be truly financially secure you need to accumulate a critical mass of capital that, invested at an 8% rate of return, provides you with enough cash to meet the following needs forever, without having to work again unless you choose to:

  1. Monthly mortgage payment on your home until it’s paid off (or otherwise your monthly rent)
  2. You and your family’s food needs each month
  3. All utilities
  4. Transportation needs
  5. Insurance
  6. Taxes

We are using an 8% return here based on a diversified, growth-oriented asset allocation. Feel free to change the annual return to fit your expectations.

Go ahead and calculate how much you need for each of the six categories above. If you don’t know the amount for each of these monthly expenses, then that is the first job. You can’t have a target for financial security without understanding these basic numbers.

Here’s a simple example:

  1. Mortgage: $1,200
  2. Food: $330
  3. Utilities: $360
  4. Transportation: $280
  5. Insurance: $320
  6. Taxes: $460

In this case the monthly total is $2,950, so annual is $35,400. That would require capital of $442,500 @ 8% return.

Now calculate how much capital you would need to be financially secure.



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