Eyes on the Horizon: Financial Planning to Maximize Your Net Worth

Everyone has goals when it comes to how they’re going to spend their day, their month, even their year. But what about the really big goals? The thing you’ve dreamt of doing all your life, the legacy you want to leave, or the person you want to be remembered as? We call those goals your “horizon.”

Your horizon might be a long way off, but it’s getting closer every day. More importantly, you don’t know exactly how long it will take to get there, so it’s best to be prepared for anything. Here’s how to get started.

What’s Your Horizon?

Everyone’s horizon is different, but there are a few major financial goals that might stand out as a priority for you:

• Retirement: one day, you’ll hang up your hat and exit the workforce. But how soon will that happen? When that day comes, what do you want your life to look like? Do you want to be supported by passive income, like ownership shares in your business, or do you want to save enough cash to simply live off that? Do you want to travel? Do you want to relocate? Defining what a successful retirement looks like for you will help you figure out how to get there.
• Business: whether you want to start a business yourself or fund a startup that you’re passionate about, you’ll need funding to make it happen. How much funding and what form it will take can be up in the air, so there’s no time like the present to make a plan.
• Family: maybe you’d like to buy another house, or a bigger house, to accommodate your growing family. Maybe you have children who are ready to buy a home and you’d like to help them out. Maybe you have children or grandchildren that will be going to college, and you want to make sure they can afford whatever education they might want. Maybe your parents need more hands-on care later in life and you want to ensure that they have the best available.
• Charity: there are thousands of worthy causes in the world, and many of them are under-recognized and underfunded. If you’re passionate about a charitable organization, there are a myriad of ways that you can help them with their mission.
• Legacy: as they say, you can’t take it with you. After you’re gone, what would you like your financial legacy to look like? Do you want to leave your estate to your family, or to a charitable organization of your choice? Do you want to set up trusts, donor-advised funds, or scholarships that will keep running long after you’re not around? Do you want to ensure the future success of the business you built? Contemplating what happens to your assets after you die is one of the biggest decisions you’ll make.

Define Intermediate Steps

Let’s pick one fairly common “horizon” goal: retiring early and comfortably. The numbers will vary for each person, depending on your assets and lifestyle, but let’s pick a round number and say that you need $10 million in the bank to retire at 55. That’s a big, intimidating number.

Instead, focus on smaller goals that will snowball into your bigger ones. Maybe you want to have your first million in a brokerage account of low-risk index funds by age 40. Maybe you want to have your first house paid off by 35.

Setting those intermediate goals is important, but it can be tricky. You might not know which goals to prioritize first. That’s where financial planning comes in. With the help of an experienced financial advisor, you can lay out the short- and medium-term goals that come between you and your horizon.

Choose Your Level of Dedication

With every goal, there will be choices to make about what you’re willing to sacrifice. For instance, you might be able to acquire wealth significantly faster if you move to one of the nine states with no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Two other states, New Hampshire and Tennessee, don’t tax wages, saving you money if you run a business. Moving to one of those states might help you meet your goals faster.

There are also personal sacrifices you can make. You might have heard of the FIRE movement, which stands for Financial Independence, Retire Early. Recognizing that retirement is a number, not an age, FIRE adherents save aggressively, attempting to set aside up to 75 percent of their income in order to retire in their 40s or even 30s.

But to meet that goal, they make serious cutbacks in their day-to-day lives. They don’t buy fancy cars or expensive houses, they don’t take luxurious vacations, and they don’t eat out much. If you’re willing to live frugally, you can meet your goals faster — but that’s a balance you’ll need to find for yourself.

Always Be Planning

You can’t start planning too early. And when it comes to your “horizon” goals, you need to keep close tabs on the progress of your goals. We recommend taking stock of your financial goals and re-assessing your financial plan at least every three years. If you hit a major milestone, like the birth of a child, the purchase of a house, or the sale of a business, it’s a good time to reassess.

To make sure you’re on the right track, talk to the experts at First Western Trust Bank. While some large banks might pigeonhole you based on your age and income level, we’ll create a customized financial plan that’s tailored to your exact goals, needs, and priorities. Get in touch today.