How To Create And Calculate Your Ultimate Wealth Target: Your Vision Statement
The process of creating and calculating your vision statement is a 4 step process:
STEP 1: Creating your vision statement:
Creating your vision statement should be a soul-searching discovery, not a clinical exercise. Your vision isn’t something you can formulate and write in one sitting. You’ll create it over a period of time, after much introspection and several drafts.
There’s no universally acceptable way to create your vision statement, but the following can be used as a guide to help you formulate yours.
Your vision statement can be as short as a sentence or as long as a couple of pages. If you do write a lengthy vision statement, I recommend that the first sentence or paragraph serve as a summary for your overall statement. You can apply the following process to help you formulate your vision statement:
Step 1 Plan some quality “alone” time.
Step 2 Brainstorm with powerful emotions. Describe what you would feel and see in your perfect future.
Step 3 Be as descriptive as you can about your vision: sights, colors, smells, sounds, feelings, emotions, etc. The more specific you are, the more powerful your vision statement will be.
Step 4 Think of yourself as being old or retired in this ideal future. Pretend you are being interviewed or reflecting on your life. Be totally honest with yourself. Answer the following questions:
* What principles are important to you?
* What does your life look and feel like?
* How do people think of you?
* How would you describe yourself?
* What has your wealth given you?
* How has your wealth helped others?
* How would you like to be remembered?
* What title would you put on your bibliography (or tombstone)?
* What three things were crucial to your success?
Step 5 Take all your notes and answers to the above questions and write the first draft of your vision statement, including a deadline by which your vision will be completed.
Step 6 Reflect on your draft and take time to refine it many times until you’re happy with it.
Step 7 Share it with someone significant to you and get their honest feedback.
Step 8 Place your vision statement in a prominent place so you’ll see it all the time, for example, on your fridge, on your computer as a screensaver, in your wallet, etc.
STEP 2: Value your vision statement in today’s money:
In step two, we take your vision statement and value it in today’s money. In other words, what would it cost you today to live the lifestyle of your dreams? You need to work out how much cash you’d need to buy your ideal future goods such as your home etc, as well as the amount of annual income you’d need to live the lifestyle of your dreams.
Let’s use a really simple example (which I’ve filled in in the attached vision statement spreadsheet calculator for your guidance). Let’s say your vision was to live in a beautiful home which you estimate will cost you $1.5m and you wanted $200,000 per year in spending money. Thus to realize your dream you’ll need $1.5m in cash to buy your home and enough assets to produce an annual income of $200,000.
STEP 3: Adjust for inflation
Unfortunately, you’re not going to retire today, so you need to adjust your dream costs for the effects of inflation until your retirement. Inflation reduces the purchasing power of your money so that one dollar today will buy more than one dollar a year from now.
Let’s say your dream is to retire 15 years from now and you estimate that prices will likely rise 3% percent per year. The effect of inflation on your dream costs is to increase the amount you need to accumulate by a multiplier is of 1.56 (i.e. (1+0.03)^15). Thus your $1.5m dream home will actually cost you $2.34 in 15 years, and your $200,000 income requirement becomes $312,000 per year (again the attached spreadsheet will calculate this for you). You now have a fixed target to aim for.
STEP 4: Calculate the assets you need to produce your required annual income
Since your intention is to maintain and grow your asset base and live off the income that the assets produce (rather than sell any of your assets like a typical retirement plan), the calculation is simply:
Required assets = Desired income / expected return
So your goal is to earn $312,000 per year in 15 years. You need to estimate what your likely annual return is going to be on your assets. If your planning to become wealthy it is fair to assume that you’ll be a better investor than the average poor or middle class retiree, so let’s use a slightly higher expected return on your money, say, 8% to 10% per year.
Thus, your required capital is:
Required assets = $312,000 / 9%
= $3.46 million
With $3.46 million, you could earn $312,000 per year forever. This is why your life expectancy is irrelevant to a wealth plan. You never erode your assets to live, so you’ll have $3.46 million to pass on after you die, whether that’s in one year or thirty years.
So to fund your dream retirement you will need $3.46m to pay you your annual income and $2.34 to buy your dream house. Thus you’ll need a total of $5.8m to live your dream – your vision!
(Remember, $5.8m is money 15 years from now. If you divide this number by the inflation multiplier of 1.56, you get the value of your dream in today’s money, which is $3.72m.)
Good luck creating and calculating your own vision statement.
Watch the video related to refinance calculator
www.homemortgageequityloans.com Refinancing Home Mortgage Calculator You are a lucky person if you have built equity in your home. Why? The reason for that is that you can now refinance and receive money to use for something you want without getting an expensive personal loan. But can you? Using a mortgage calculator will help you find out if you can get afford a loan versus your home equity. To learn more on home mortgage calculator, just follow this link now.
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About Author
Emlyn Scott -
About the Author:
Emlyn Scott is the founder of Rich1Percent, investor and wealth creation author. He is a wealth creation and finance expert with 4 post graduate qualifications and has amassed a multi-million dollar investment portfolio.
Tags: Community, Financial Freedom, making Money, money, mortgage, rich, wealth, wealth creation education
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June 21st, 2010 at 1:41 pm
For calculators on mortgages, try bankrate.com
They have all kinds of calculators and information, including info on how to figure out when it is worth refinancing.
(does "2 yrs left to go" refers to when you don't have to pay a penalty? If you have many years to go on your mortgage, consider getting a fixed rate if you think interest rates may go up in the future…)
You can even comparison shop for mortgages on bankrate.com.
June 21st, 2010 at 3:09 pm
You might be better off asking this question in the motoring questions, hope you find out, good luck.
You'll want to check these guys out….99% approval they say.
http://www.123thebest.info/go.php?link=auto
Best of luck to you.
June 22nd, 2010 at 1:34 am
Think of a mortgage as a monthly loan. If you the current principle on your mortgage is $200,000 and the loan is a 6% APR loan, the interest owed for that month is $200,000 * (.06 apr /12 months) in interest, or $1,000 in interest. If your payment is $1,200 per month, the extra $200 goes to reduce principle. As time goes on, the loan balance is reduced because of the principle payment. Also, since the principle is reduced each month, the calculated interest payment is less so more of the total monthly payment is applied to the principle (loan balance).
It doesn't matter if the length of the loan is 30 years, 15 years, or seven years or if you are making the first payment, the twenty-first payment, or the 183rd payment – the calculation is the same for the interest, which is current loan balance times the apr/12 months. What does vary with loan length is the total payment of interest plus principle; the shorter the overall loan length, the higher the monthly payment (principle plus interest) has to be so the principle portion will reduce the loan balance to zero in the time frame.
So, if you were to refinance your seven-year-old loan at the exact same interest rate, the amount you would pay for month one on the interest portion will be the exact same as it would have been at the seven year point under the old loan — but if you refinance back at 30 years, the amount of principle you pay will be less that month, which is why the payment is lower.
However, what this means is that in month two under the new loan, your principle (current balance) will be slightly higher on the new loan because the lower payment you made meant a lower amount applied to principle, so the interest amount calculated in month two will be slightly higher than it would have been on the old loan. You will not only pay a higher total interest amount over the next twenty-three years because of this growing gap in principal owed (compared to the old loan), but — as you suggested in your question — you will continue to pay interest for seven more years.
A real comparison is to run an amortization schedule between your current loan and any refinance you are considering and look at the total interest that will be paid over the remaining twenty-three years compared to the total interest you will pay over the entire length of the new loan.
Good luck.
June 22nd, 2010 at 10:02 am
Stay away from the arm! That is why we are having this bog forclosure crises. The arm sounds great but this is no gurantee that you will for sure be out of your home.
My husbadn and I got lucky for the first time in our lives and we purchased a home on a 30 year mortgage at 5%. MOST of the people in out neighborhood did 1 year and five year arms because they were in the 3-4% range at the time and now they are regretting it big time. I live in Raleigh NC and we supposedly have the best real estate market at the moment, yet this houses have been sitting on the market for 1 year plus. There are tons of houses in my neighborhood for sale b/c the rate went sky high on them and they cant afford. Three homes have been forclosed.
In the end it is your descion, but I would steer clear.
Good Luck Robert!
June 22nd, 2010 at 10:15 am
There are other things to consider other than rate, that matter:
1. How long have you been in your existing mortgage? If you have had it for 5 years, why go back into another 30 yr mortgage?
2. How long do you plan on staying in your home? If less than 5 years, then take out a 5 yr ARM, possibly even interest-only, if any longer than 5 years, then a 30-yr fixed would be a great, since there is very little difference between a 7 yr ARM and a 30-yr fixed in today's market.
3. How much will it appraise for (based on recent sales in your area)?
4. Will you be liminating PMI, or assuming PMI if you refinance? Meaning, if you refinance for 290K plus costs, if you are over 80% of the value of your home, known as Loan-to-value, or LTV, you may have to pay PMI, which for 2008 is not tax deductible last time I checked, so you may want to find out if the bank offers a no PMI loan, and whether it benefits you, as mortgage interest is fully tax deductible (No PMI loans have slightly higher rates, as the PMI is financed into the rate, but the payment is generally lower as compared to a loan with PMI)
5. Are you taking any cash out to consolidate any debt, or for home improvements? If you are, then that's fine.
6. Closing and Settlement Costs – typically on the high side you would expect them to be about 4% of your loan amount, for a conventional loan. Some banks offer no-closing cost loans, but the rates are slightly higher than with a conventional mortgage. The costs though, would be rolled into the mortgage, therfore, you would need to recalculate your payment based off of the new balance. Does this make sense?
7. Refinancing your mortgage for the same amount, meaning you are taking no cash out, is worthwhile if you will recuperate the cost of doing it within 4 years of the refinance. Personally, I restrict that time frame to 2.5-3 years for my own choices.
But in the end, a drop in arte of .75% or more is generally a good reason to refinance. You may also want to ask about buying the rate down to a lower rate. Remember to use the rule of calculating how loang it will take you to recoup that cost to determine if it is worth it or not.
Also, ask about escrows – the bank may offer lower rates if you escrow your taxes and insurance. If not, then I would recommend not escrowing and putting the money into savings or a CD every month and earn the interest on it.
Hope this helps.
June 23rd, 2010 at 4:52 am
June 23rd, 2010 at 6:32 am
because of difficult financial circumstances countless Americans are in debt. what i advise doing to prevent being in debt is to check your credit score and report monthly. check out http://creditinfoplace.notlong.com if you need aid.
June 24th, 2010 at 11:13 pm
You may want to download free OpenOffice, which includes spreadsheet totally compatible with Microsoft Excel.
http://www.openoffice.org/ (version for Windows and version for Linux both are available to download).
There is a plenty of formulas and even macros suitable for any needs. Some macro could be downloaded from web sites of sharks.
The best solution could be also to not taking any loan at all. Saving account with 4.5% per annum, monthly payments and compound interest is your friend!!! In this way, bank gonna pay you, not vice versa. You cannot get loan with 4.5% interest, right?
So, it can get you your home in not so long time and sets you free. Your heart will be filled with joy and your kids will be grateful to you for not having any debts and financial obligations.