Start Your Retirement Investing the Right Way with Your Goals!
Nation, it has been a crazy year for investors. We suffered through the fastest crash in history, more than 40 million people lost their jobs. We then saw the fastest stock market rebound in history, up 44% in less than three months but the tragic fact is that a LOT of investors didn’t benefit from that recovery.
We’re seeing massive FOMO, investors trying to jump in and out of stocks, and honestly it’s all more than a little bit exhausting!
So I’m going to spend the next three videos to make investing EASY! We’ll be going step-by-step through a plan on how to invest you can personalize to your needs and take the stress out of investing!
In this video, I’ll show you how to get started the right way by understanding your investing goals. We’ll look at finding your magic number for retirement and why this is more important than most investors realize.
Complete Investing Course Online
Honestly Nation, I know a lot of you like the stock-picking videos, but this right here may be the single most important video you watch on how to invest. What we are going to talk about in this video will not only give you a direction for investing, more importantly, it’s going to give you the motivation to always be moving forward towards your goals.
In those next two videos, I’ll show you how to use this to invest, what stocks to buy and how to match your portfolio with your goals. I’ll also show you how to compare stocks so you only invest in the very best out there.
This is going to be a complete investing course in three videos and to help you out, I’m putting together a Free checklist so you can follow along.
Download Your Free Checklist for all Three Videos on How to Start Investing!
Why Investing Goals Come First!
Nation, any investing plan HAS to start with your financial goals. That’s why you’re investing your money in the first place. I mean, I’m assuming you’re not doing this just for shits and giggles…that you want to make money and spend that money, right?
But so many investors ignore this critical first step. They jump right to looking for stocks to buy, they invest in whatever comes along and they never have any direction to their investments.
It’s like leaving for a road trip with no destination. You end up out of gas in the middle of nowhere, wondering where you went wrong.
This is two out of every three retirees depend on social security for most of their income. Because they spent their life chasing stocks with no direction, they ended up losing money and missing out on the opportunity to beat their goals.
Not only will understanding those goals help make sure you reach them, I’m going to show you a way to use those goals as motivation to make investing easy!
How to Create Your Financial Goals
So let’s first look at how to create your goals then I’ll show you an easy retirement calculator to see exactly how much you’ll need. And I want you to think of all your financial goals, not just what you want in retirement but everything you want from your investments. This might include kids’ education, buying a home and that dream vacation.
And the power here isn’t just in saying, ok I want a million dollars to retire. How these goals are going to help plan your investments and motivate you is by making them REAL! Making your goals real means thinking through each, creating a story in your head about that goal from what your day is like, what you’re doing and even the people around you.
With this story, you’re going to be able to put a price tag on that goal. By understanding exactly what you want to do, you’ll be able to understand how much it’s going to cost and how much you need.
Just as important though, anytime saving gets tough. Any time the market crashes and you get disappointed in your returns, you’re going to take out that mental image of your goals. You’re going to use that mental image to help motivate yourself to keep saving and keep investing. That’s the real power in all this!
Now let’s use those goals to know exactly how much you need to invest and we’ll be using our Let’s Talk Money spreadsheet here but you can use any retirement planner. I like using our spreadsheet because it’s going to combine your goals with your portfolio and stock comparison steps automatically.
I’ll leave a link to download the spreadsheet below as well. The spreadsheet was three months in the making and includes some great features so make sure you check that out.
Download the Spreadsheet and Get Started on Your Financial Future!
We’ll start on the Investing Goals tab and scroll down to the section on how much you’ll need in retirement. The spreadsheet includes a section on how much to invest but we’ll come back when we know how much you need.
Estimating Your Retirement Magic Number
The first thing you do is estimate how much you’ll need each month in retirement or whenever you want to start withdrawing from your investments. We’ll put in $5,500 here and the spreadsheet automatically converts this to an annual amount.
Next you estimate your tax rate and since most of this money is from long-term investments, we’ll put in 15% for those capital gains. Now if this is coming from a retirement account and will be taxed at income rates then you’ll use those income tax brackets here.
Last here to see how much money we need from our investments, we need to estimate how much we’ll be relying on social security or any other pension income. Now the average social security check is $1,300 – about $15,000 a year. You can also use the Social Security Administration’s quick estimate calculator to find how much you can expect and I’ll link to that in the video checklist.
Here, I want to be on the safe side so I’m going to put $12,000 and the spreadsheet tells me I’ll need $77,000 a year from my investments.
Now I know every financial advisor says you can take out 4% of your investments each year but the truth is you can actually withdraw closer to 5% and still not worry too much about going broke. I’ll use 5% here but you can play around with it. With that, the calculator tells me I’ll need about $1.3 million to cover those expenses by the time I retire.
Estimating How Much You'll Have in Retirement
Now if we scroll back up, the spreadsheet is actually going to help us find how much I need to invest each month to reach that goal. It’s already pulling in my current investments which we’ll look at how it does that in our next video, but I can also put in my age, how many years until retirement and how much I invest each month to get an estimate for my savings when I start needing that money.
So I’ll put in 49 here and plan on retiring in fifteen years and currently invest about $1,000 a month. Using historical returns on my investments, the spreadsheet is estimating that I’ll have just over $1.4 million to retire on in that fifteen years which would which leaves us with a little leeway to that $1.3 million goal so we can play around with the numbers, maybe retire earlier even.
Get Your Free Checklist to all Three Videos; How to Plan Your Finances and Start Investing!
So the great part here is you can play around with the numbers to see how they come out. If you’re over like I am here, maybe you add a few more goals and increase how much you need, maybe you plan on retiring a few years earlier. It’s going to really help clear up exactly what’s possible with your money!
About the Author
Joseph Hogue is a financial expert and investment analyst. After serving in the Marine Corps, he started his career investing in real estate before becoming an investment analyst for some of the largest private investors. He's appeared on Bloomberg and on CNBC as an investment expert and has published ten books in personal finance. Now he helps investors reach their financial goals and invest in the stock market with some of the same advice he used when working for the rich.