Welcome to the first installment of the do-it-yourself financial plan!

We’re excited that you’re joining us, and we hope you’ll find this course practical and relevant… and perhaps a little entertaining.

To get things started, check out the introductory video where we cover how we “start at the end” and use values-driven goals to help define what success looks like and how you can use your wealth as a tool to pursue your passions.  After that, scroll down to get started with the basic calculator that we’ll use in the course.


TWS Goal Calculator (click to download the Excel file)

There are a few concepts you need to be familiar with, so let’s tackle them now:

  1.  Inflation – A rise in the prices of goods and services that decreases the purchasing power of every dollar you own.  Said another way, prices in the future are probably going to be more expensive than they are now.  So if you want a lifestyle in the future that’s worth $100,000 per year today, it’s going to cost you more in the future.
  2. Investment return – The return on your invested assets.  Vanguard has a good historical perspective of the performance of various portfolios… you can check it out here.  Most of the time you see returns as nominal values, which are face-value performance statistics.  For instance, when you see that the S&P 500 returned 10% in a year, that means that the S&P 500 index of stocks increased in price by 10%… the effect of inflation isn’t taken into account.  If you see “real return,” that means that the reported performance of an investment has been adjusted by inflation.  There have been periods in the U.S. where the stock market had positive nominal returns, but the economy had such high inflation that investors actually saw a negative real return.

That’s about it for the first section, so let’s check out a video on using the goals calculator:

(Note:  At around 8:25 we adjust the value for how many years we have to save for this goal as an example of going through a change in our goals… remember to update all the values in the calculator to reflect where you are presently.  That includes how many years until the goal starts and how much you have saved.)

Next up:  Putting your values, goals, and savings targets into the context of your budget (for people like us who find budgets boring).

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