Put A Price Tag On It: Financial Planning

Financial Planning

$10,000.

I was out shopping with my wife and daughter last week, and a watch — a watch I won’t name — caught my eye. Or its price tag did.

I’m sporting a $30 digital watch, so this one’s five-figure sticker price was hard for me to fathom. Then again, I’m sure there’s stuff I spend money on that would have other people shaking their heads. No matter how widely different our priorities, all financial goals share one trait: They come with a price tag.

I’m not sure why the $10K tag on the watch was such a shock; I know people can have expensive tastes. Whenever I meet a new client, our initial conversation always includes identifying goals, and over the years, I’ve heard some crazy ones: exotic trips, exotic animals and, of course, exotic vehicles.

I guess that watch just reminded me that there are some pretty robust price tags associated with the goals we aim to accomplish. The watch also highlighted the serious financial planning and execution required to achieve those goals.

Let’s take a look at a few goals that might be on your list. Their accompanying price tags might open your eyes to the advantage of being proactive:

The Big Wedding: $31,213

That’s the average price of a marriage ceremony and reception, according to wedding planning site theknot.com. Now I know why my uncle — a man with four daughters — always looked a little frazzled.

Game plan: Start early and set up a fund earmarked for the celebration. Let your savings and financial capacity dictate what’s spent. Don’t let the excitement cause a financial catastrophe.

Retirement: $1,250,000

If your average salary is $50,000, this is about how much you’ll need to live off of through retirement. Your number may be a lot bigger depending on where you’re going in retirement. Do you know what you are shooting for? Most people do not. Use some of the handy tools and calculators available at usaa.com or enlist a planner to help you realize your goals.

Game plan: Consider putting money into your retirement plan at work if you have one, and always get 100% of matching contributions. Fund an IRA, bump up what you’re saving and knock down debt at every opportunity.

Raising a child: $245,340

I don’t even know where to start with this one. This is the U.S. Department of Agriculture’s estimate of what it costs to raise a child born in 2013. You may be thinking that’s way overstated, but adding children to the family has big financial implications.

Game plan: Plan for how a baby will affect both income and expenses.

Sending child to college: $80,000

By the way, the previous USDA figure did not include college. As we’re in the midst of a huge student loan crisis, that’s a big deal. Add up the College Board’s estimate of the in-state cost of tuition, fees, and room and board at a four-year public university and you end up with a pretty hefty number. Start planning to make this manageable, which means minimizing student “aid” that comes in the form of a loan.

Game plan: Consider setting up and contributing to a 529 plan for your kids or grandkids, leverage cool tools like Upromise to boost savings and make finances a key factor in how your family gets educated.

The roof over your head: $320,744

In June, the Mortgage Bankers Association reported this as the average loan amount to buy a new home. For most of us, a mortgage is the biggest debt we’ll ever have. When it comes to home buying, the key is  to make it fit into your budget. Don’t let your home become your financial prison.

Game plan: Build a “home fund” for your down payment, closing costs and move-in expenses, and maintain an emergency fund for maintenance and breakdowns. Protect yourself with adequate homeowners and life insurance.  

Murphy’s Law: $1,000

“Anything that can go wrong, will go wrong.” It’s a common phrase for a reason. Things break. Accidents happen. This summer, with a vacation scheduled the next day, our water heater started leaking — ouch.

Game plan: Set up an emergency fund and contribute to it regularly.

The fun stuff: $3,000

What’s on your calendar? Holidays, birthdays, trips and big purchases are all examples of scheduled goals that come with known price tags. We save all year for things like this in my house, which helps take some of the financial sting out of our vacations and celebrations.

Game plan: Start a savings account specifically for your goal(s) and put aside a little bit each paycheck.

These are just the everyday goals; I haven’t even touched on some of those exotic things you dream about. Make a plan and take action today to make those dreams a reality — a reality that’s not tethered to a boatload of debt.

About the Author

JJ Montanaro
Joseph “J.J.” Mon­ta­naro is a CERTIFIED FINANCIAL PLANNER™ prac­ti­tioner at USAA with more than 19 years of expe­ri­ence in the finan­cial ser­vices indus­try. JJ also served in the U.S. Army for six years on active duty, and in 2009, he retired as a lieu­tenant colonel in the U.S. Army Reserve.