Here are the stories of two hypothetical couples that are approximately the same age (38-42), have almost the same annual household income ($450k), have roughly the same investable assets +/- $1,000,000. Both couples save claim to be saving at about their max while they maintain their lifestyles. Both couples also aim to be financially independent at age 60.
Their Actual Differences:
Florida Family
- No state income tax
- One child
- Total monthly expenses, $9,500
- Monthly savings: $4,600
- Monthly investing: $5,000
South Carolina Family
- State income taxes
- Three kids
- Total monthly expenses: $14,000/month
- Monthly savings: $1,500
- Monthly investing: $2,500
The Outcome
- The Florida family was saving way too much! They were ahead of plan by about $24,000 annually.
- Their choices:
- Become financially independent ahead of plan
- Take a fun family trip or two
- Upgrade or improve your home
- Their choices:
- The South Carolina family on the other hand, slightly behind plan. For them to get back on track they’re looking at tucking away another $1,000/mo. Altering their plan means a combination of working longer, spending less, saving more, or earning more.
From the outside, you’d think their finances were the same, however, under the hood the plan tells a different story.
The most important planning question when you get into the numbers is, “If you retired today, how much money do you need from your portfolio on a monthly basis to live the life you want to live?”
It all starts with a plan that is based upon your goals for your family.
–Nic
