11 Guidelines for Building a Financial Plan for the Life You Want

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Editor's Note: This story originally appeared on NewRetirement.

So much that is written about retirement planning is about rates of return, inflation, savings thresholds, tax mitigation, budgeting, asset allocations, and other relatively dry and often somewhat stressful topics.

However, most people care about their finances and planning for retirement because they have a dream for their future.

It is important to remember that financial strategies are merely a means to an end — the life you want. And, keeping the focus of your planning on those dreams can produce better outcomes.

Here are guidelines for using your dreams to help you build a financial plan for the life you want.

1. Focus on Your Dreams, Not Your Savings Balances

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When building your retirement plan, it is more meaningful and effective if you build your plan based on what you want to do and experience in the future rather than on an arbitrary savings balance.

In fact, don’t start with what you think you can save. Start with what your dreams are for the future. Those dreams may inspire you to do things differently starting now.

2. Build a Future Budget for the Life You Want

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You have probably read it before: Figuring out how much you need (and want) to spend is the single most important aspect of retirement planning.

Your future spending determines how much you need in retirement income and savings. The more detailed you get, the better.

Unfortunately, the message isn’t getting through to everyone. (According to a Merrill Edge report, many Americans have absolutely no idea how much they should have saved.)

3. Celebrate Milestones, Not Birthdays

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Are birthdays the memories you want to make? Do you want the focus of retirement to be your age?

Eric, a reader on the NewRetirement Facebook group, writes that he is “Beginning to experience the need to create achievement goals to celebrate milestones other than age.”

For example, do you want to remember 2023 as the year you turned 66 or the year you and your family made a bid for a Guinness World Record?

4. Consider Purpose as You Plan Your Dreams

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The research is pretty clear that having a sense of purpose and meaning in your life is better for your emotional and physical well-being than a pursuit of happiness.

As you dream about your future and set goals, consider how purpose fits into your pursuits. Here are a few resources for inspiration:

5. Be Flexible About How You Define Dreams

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Sure, a lot of people probably dream of spending their days in the lap of luxury on a beach in the South Pacific, but that isn’t going to be affordable for everyone.

In fact, a lot of us have to work well into our 60s and 70s. In some cases, you may want to fit your dreams into that reality.

There is a lot of satisfaction that can be had from working. Jobs often provide meaning, purpose, and structure to your life — and, as discussed above, those are pretty good dreams.

6. Dreams Don’t Have To Cost a Lot

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Jeff opines, “While there is nothing wrong with budgeting for travel, my dreams are much smaller. I was lying in bed listening to the rain at around 4 am this morning.

“I can take the time to listen to the rain. Or, read a good book. Or, spend time with my wife. I do not have to go to work.”

He continues, “My budget has no line item for life at a slower pace with no stress, but I am living my dream.”

7. Beware of Lifestyle Creep

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Lifestyle creep happens when your income rises and former luxuries become necessities. You get used to spending more.

Karen warns, “People quickly become acclimated to whatever level they are at so in that respect the number [how much you need for retirement] keeps rising.”

To avoid lifestyle creep, it is important to assess what drives your happiness. Get to what is essential in your life. Understand what is “enough.” “Enough” is the dream.

8. Understand That Many Save Too Much

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Saving too much is more common than you might think. It is not quite as common as not saving enough, but it happens.

Over saving often stems from wanting to be prepared for any and all possible future scenarios and a fear of running out of money.

It can also be an ingrained habit. It can be difficult to transition from a lifelong practice of saving to spending on yourself and your dreams.

Learn more about why people save too much and assess advice from others who have over saved.

9. Put Spending in Perspective

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Many of the wealthiest among us really worry about spending, especially spending on things that may not be deemed necessary like “dreams.”

A couple of people recommend putting spending in perspective.

Keith says, “I’m always amazed at how we reflexively resist spending amounts that are around the equivalent of one-hour fluctuation in the value of our portfolio.”

And, Ray added, “How true. I bought a car during the volatility surrounding the pandemic. I was negotiating a $400 difference when I realized that the day-to-day fluctuation in my net worth was easily worth 3 of other cars. That made me laugh.”

10. Know What Savings Balance Enables You To Be Carefree

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One of the most frequently cited retirement goals is having enough money to feel peace of mind and to live carefree.

David writes about his ultimate formula for knowing how much you need for retirement.

He advises, “I told my brother-in-law last month who is five years to retirement that the key to happiness in retirement is to be able to just sit and enjoy life without having to worry about money and spending. That can be sitting on the deck and just enjoying life and family get-togethers to going on travels and not worrying about money and enjoying the experience.”

Feeling carefree means that you have a holistic financial plan that:

  • Will support you in a wide variety of future possibilities
  • Accommodates your dreams

The NewRetirement Planner is the best online tool for building and maintaining this plan.

11. Plan for the Future but Live in the Present

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Planning for dreams is important. You aren’t going to achieve your goals without a plan.

However, you also need to find happiness in the present.

Explore eight tips for thriving where you are right now — no matter what your stage of life — and especially if you are in one of those awkward in-between phases.

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