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BAM Intelligence

Turn Goals Into Numbers — Steve Harvey

By Steve Harvey, ML&R Wealth Management, Austin

A primary requirement for achieving your financial goals is to quantify them. Without a clear understanding of one’s long-term financial needs and objectives — in terms of numbers — it’s nearly impossible to put together a financial plan and investment strategy to meet them.

The idea of quantifying financial goals is critical. Sometimes, objectives can be too vague to act on properly. For instance:

  • Provide for my family
  • Leave money for the next generation
  • Help my children pay for college, weddings and first home down payments
  • Invest safely (do not lose lots of money in stocks)

It would be very difficult to make decisions that support the achievement of these objectives without assigning each a value. Ignorance can be bliss, but only for so long.

Why numbers?

Ultimately, turning vague goals into numbers makes them quantifiable, measurable and more attainable. In financial planning, this means understanding the future cash flows needed to pay for retirement, save for college costs or make a long-term philanthropic commitment.

You have to answer questions like: How much money will we need? When will we need it? What rate of return is needed to achieve the goal? What impact will inflation have on our plans? These questions are critical to developing a detailed financial plan.

Then, you can determine the kind of savings and investment portfolio that will be needed. You can monitor your progress and modify your plan as needed to achieve that goal.

Getting specific

If you wish to leave money for the next generation, you would need to determine how much to save each year. That number depends on whether you intend to leave a few thousand dollars or hundreds of thousands of dollars to each child. You also need to consider how much risk you will need to accept to achieve this goal and what kind of asset allocation makes sense. Another big consideration would be whether you have enough money saved for your own retirement, which would then allow you to leave money for the next generation.

In truth, financial planning should be done on a holistic basis, incorporating goals throughout one’s lifetime. When you can envision the general level of cash flows you will need throughout all phases of your lifetime, you can start making informed decisions on what specific actions need to be taken to achieve your goals.

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The opinions expressed by featured authors are their own and may not accurately reflect those of the BAM ALLIANCE. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.

© 2013, The BAM ALLIANCE

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Lead Partner, ML&R Wealth Management, Austin

Steve Harvey, CPA, CFP® is the lead partner for ML&R Wealth Management, an independent member of the BAM ALLIANCE.

Steve assists clients in developing long-term investment strategies and creating investment portfolios designed to achieve their financial goals and objectives. In the community, Steve is involved with the Lake Travis Education Foundation, and he is the chair for the Center for Child Protection NFL Alumni Classic Golf Tournament.

He holds a bachelor’s degree in business administration and accounting from Texas State University.

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