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In order to answer these questions, we need to set financial goals. I know very well that if you start writing down
numbers, they can get a bit discouraging. It’s one thing to say that you’d like to have a net worth of $3 million and
cash flow of $30,000 a month by the time you’re 50 years old. But it’s another to make those commitments and then
look at where you are now. That gap can scare you away and make you abandon any vision, no matter how
compelling. It is vital that at this point you see these numbers as reference points and measurements, and every
hurdle as an opportunity to learn a new lesson and make a better choice.
It would be similar to the decision to walk from San Francisco to Washington, D.C. That’s an exciting and doable
objective. But even if you can manage 20 miles a day, it will still take half a year. The number of reference points
you have to pass—each city and state along the way—and the hurdles you must overcome—bad weather, sore feet
—may all seem daunting, but if you keep walking, you know you’ll make it, because you’ve got your vision set for
the nation’s capital and the course is defined.
The first step is to list your general financial goals. These may include such ideas as starting your own business,
living a life of luxury, creating a charity, or sending all your kids to college and graduate school. These are broad
objectives that need to be sketched in greater detail. The second step is to think about exactly how much money you
need in order to have that goal be reasonable.
First, list your broad objectives: for example, to have a net worth of over $10 million, annual cash flow of $2
million, and a home in San Francisco and Paris; to start a children’s summer camp; and to make charitable
contributions of, at least, $500,000 annually.
Next, evaluate and prioritize each of the goals in the broad objective. In doing so, you should take into account
(1) its level of importance, (2) the time frame in which you want to accomplish each goal, and (3) the amount of
money you think you’d need to accomplish that goal. When you create your Financial Baseline, you will see how
much money you will need to get to each goal, based on your current financial situation.
The third step is to forecast how much you must invest each month to reach your financial goal. This number has
nothing to do with taking care of debt and other obligations—not yet. We are working on your vision, where you
want to go, and the specific actions to make this work will follow.
Let’s say, for example, one of your goals is to put a child through college, fully covering tuition and books, as
well as a monthly stipend for rent, clothing, food, a car, auto insurance, and some entertainment. Before we can
determine how much you need to invest monthly to reach your goal, several variables must be filled in. These
variables are time, total cost, rates of return, and the mathematical multiplier. (For this goal, college tuition and
expenses, the variables can vary wildly. In the example, below, I’m using numbers that are realistic, but not
necessarily based on any specific situation, college, or investment vehicle.)

Time: The time it will take to reach the goal: for example, 15 years
Total cost: Estimated cost of the goal: for example, $150,000
Rate of return: The monthly interest you can earn on investing cash now: for example, 6 percent
Mathematical multiplier: The number you multiply with your total cost
To find out how much you need to invest each month, you multiply the total cost of your goal by the
mathematical multiplier (noted below). If you have the other two variables—total number of years to reach your
goal and the rate of return (in this example, 15 years and 6 percent), you can quickly get the mathematical multiplier
from any bank, financial Web site, or financial software program such as Quicken and Excel.
The mathematical multiplier for 15 years at 6 percent is 0.0034. The equation looks like this:
$150,000 × 0.0034 = $510 per month

You can use the mathematical worksheet on our Web site, www.liveoutloud.com , to find the multiplier for each
of your goals, inputting the number of years and the amount of interest you’re going to use. The chart will help you
work these out.

STATE BROAD OBJECTIVE