The tools for financial independence are at your fingertips, as long as you know where to find them.
In this interview, Mark H. of SimplePlanning.net talks about financial planners and calculators and how they can help individuals plan for retirement, college, and just about anything else. But savings isn’t all these planners and calculators help with.
Here’s what Mark H., who can be contacted at admin@simpleplanning.net, has to say about saving.
In what ways do financial planners and calculators benefit individuals?
Financial planners and calculators are a quick and affordable way to plan for certain future financial events, such as saving for college, planning for retirement or simply setting a budget to live on. Not only are they a means of planning, but education as well. The more time you spend with these tools, the better you will understand what aspects of your planning are most important.
What kind of skills do individuals need to use various financial planners and calculators?
Ideally, there should be no skill set or prerequisite needed in order to use a financial planner or calculator. The best calculators are ones that everyday people can pick up quickly and build realistic plans by simply following the lead of calculator.
How should one use these tools to plan for retirement needs? What tools should be used to make the most out of one’s financial assets?
As it relates to planning for retirement, it’s important for investors to, at a minimum, utilize some kind of planning tool that allow them to accurately forecast their expected retirement savings at the expected retirement age.
Now, this is really just half the equation. The retirement software should also be utilized to answer another important question, and that is “How long will my retirement funds last?”
These forecasts, of course, are based on a number of variables such as pre- and post-asset allocation, annual contribution rates, investment return assumptions, your expected retirement age, and how much you are planning to spend (or earn) during retirement. A good retirement planner or calculator will encompass all of these variables and many more so that the forecast is as realistic as possible.
Because there are so many different variables at play and because the “answers” to these questions depend completely on our inputs, we should consider the answers that these tools spit out to be estimates. So, there are two takeaways here. One, build multiple scenarios when you are planning for your retirement – meaning, save several different versions – each of them with variations on your input values (i.e. instead of assuming a 6% return on your investments, assume a 5% return on your investments). You will see very quickly how modest changes in assumptions can impact the end results drastically.
Second, remember that retirement planning should be an ongoing effort. Ideally, you should revisit your retirement planning tool every six months to see what variables have changed. If you have new information, the tool could spit out a very different answer than it did initially.
Maybe you’ll be able to retire sooner than you had previously thought – or maybe you’ll need to work that extra year before you retire (enter Debbie Downer horn here).
How do investment calculators help individuals throughout various stages in life?
I think it’s safe to say that a 30-year old single man would likely have slightly different financial needs than a 75-year old married couple. The first financial tool that I built was a Microsoft Excel spreadsheet that helped me track the price of each stock that I had in my portfolio. After that, I thought it might be a good idea to build another Excel spreadsheet for budgeting so I could figure out how much I could afford to invest. Now, I use the Retirement Planner (the same one we offer on Simpleplanning.com) to see what I have to do in order to retire by 50. A good set of tools will help you do all of these things
Retirement accounts can cause stress for some individuals. In what ways can financial planners and calculators help these individuals feel more secure?
I think retirement planning, regardless of the investment vehicle used, is a real source of anxiety for most people. Most people don’t do their own retirement planning, and as a result may not fully understand the numbers.
Many rely on a third party to tell them how much to save, where to save it and when to retire. What if I’m not able to consistently save the recommended amount? What happens if the stock market is down over the next two years? Or how do I know that this financial planner knows what he’s talking about?
If these kinds of questions don’t leave you a little bit anxious, then you’re not serious about your retirement plan. That’s why I think it’s critical to get involved in your planning and utilize retirement planning tools in addition to seeking professional advice – so you are more confident in what you are doing to achieve your retirement goals.
What approach does Simple Planning feel is best when it comes to saving for something (house, car, retirement, school, etc)?
First, create a budget and stick to it. From this budget that you build, identify exactly how much you can save on a monthly basis. Essentially treat it as a recurring expense. Once you do this, have this amount automatically tucked away in the account that you cannot easily get to. If it’s a short-term savings goal, then throwing the money into the stock market probably isn’t your best bet (stick with something a little bit safer).
But if you’re saving for retirement and it’s 30 years down the road, get that money out of your savings account or CD and get it into mutual funds – preferably index mutual funds as they have the lowest management expenses.
Please share anything additional you would like readers to know about Simple Planning.
At Simpleplanning.com, we do our best to provide simple, low-cost, Excel-based financial planners and calculators that help our customers help themselves. From our Budget Planner to our Retirement Planner, we help our customers skip the step of building a functional tool so they can jump right in and start planning for a financially sound future.
