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Jorgen Vik: Set financial goals to get from here to there

Jorgen Vik: Set financial goals to get from here to there

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Investment planning, simply put, is about getting from here to there.

Start there, with your goals and aspirations.

This is a fun part of the process; let yourself dream a little.

Where do you want to be? What do you want to do? And with whom?

This can motivate you to go to the next step which is work. Important work.

Where is here — where are you, financially speaking?

That is, calculate your net worth and your income streams.

I know this is not sexy, like picking what stocks can quintuple over the next two years, but if you don’t go through this step, it’s a bit like building a new house and first picking the countertops and stylish furniture while skipping the technical drawings.

So, net worth is all you own minus all you owe. Your assets can grow and provide additional income while your debt pulls in the opposite direction.

You’ll need to know your assets and their tax status in order to estimate how much you can draw over the years.

And you’ll need to know your debt and their payment requirements going forward so you know what money won’t be available for spending on other things.

One benefit from assessing your net worth is to get a better sense if your debt is suited for your situation — or possibly could be changed to reduce your payments or shorten the time until you’re debt free.

You may also find that consolidating your accounts could simplify your life significantly.

Your income streams can be pensions, Social Security, annuity income, investment income and earned income from work.

It can also be one-time cash flow items like inheritance.

Your goal setting allowed you to estimate how much money you need to reach your goals, and when you need it.

If your future income streams match or surpass this, congratulations.

If not, see what you can do to possibly increase the inflow, and reduce or postpone the outflow by adjusting your goals.

By the way, have you noticed how your specific investments make up just one part of a much larger picture? Investments matter, no doubt, but they should be guided by your goals and aspirations. Not the other way around.

So, are you confident you can get there from here? If yes, wonderful. If no, it may be time to have a closer look.

Good luck.

Jorgen Vik is a certified financial planner and partner with SKV Group LLC.

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