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The Problem with Failing to Plan
By Gary Case

Published in the Idaho Press Tribune Feb 28, 2011

As I observe people my age contemplating retirement, many wonder how they are going to fund their retirement income needs (think flipping burgers or greeting customers at the door). Have you ever asked yourself how much money you need to retire, when you want to retire, or how will the money get there? One of my favorite sayings is, “if you don’t tell your money where to go you won’t know where it went.” I hear Dave Ramsey and others use this phrase often.

Everyday life is busy and difficult, but your financial and emotional wellbeing demand going beyond the busy-ness and understand what you can do now to take care of yourself and your family later. My ideal financial plan allows a relatively “level” lifestyle throughout life, not putting too much weight on the present OR the future. Discipline and delayed gratification are required for this to happen. From a financial perspective, you need to understand how money works if you want it to work for you.

I taught a middle school class of about 20 students the concepts of compound interest and time value of money a couple of weeks ago. I offered a prize to any student who would make the effort to complete a relatively simple


assignment. Two students attempted to complete the assignment and one did so successfully. I suspect the ratio of adults doing the homework to successfully answer the questions posed in the first paragraph of this column will mirror that of the middle school class. Nevertheless, I will now illustrate a money concept for the reader’s use, “the rule of 72.”

This rule states that if I know either the interest rate or the time frame to double my money in years, I can solve for the unknown number by dividing into 72. For example, assuming a compound interest rate of 6%, 72 divided by 6 equals 12—my money will double in 12 years. This information can be very helpful in developing a plan to save $1million over the next 30 years. $995.51 is the required monthly contribution to accumulate $1million in 30 years at 6% interest. Using a 4% withdrawal rate, that million dollars will generate $40,000 each year thereafter, assuming the account earns at least 4% annually.

Simply put; 1) set a goal, 2) pay yourself first, and 3) start now and be consistent-easy to say and hard to do. Remember failing to plan in most cases means planning to fail. One of the most important things a financial planner can do for his/her clients is to help them with these three steps.


Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Cornerstone Financial Planning are not affiliated.