There is no perfect life planning, because everyone has grown up differently, has different values and is also financially differently positioned. Rather, everyone must decide for themselves what is important to them and what is not. For this purpose, I would like to present various models of how a life planning could look like. On the one hand, this should serve as inspiration and on the other hand, it should make you think. In addition, I would like to address really important points that really everyone should follow.
Preface
Tom, a good friend of mine, knew very early in life what he wanted to achieve. He got married very young and built his first house. This laid the foundation for his family planning. He knew more than 25 years ago that the future was in programming and acquired a lot of knowledge. This enabled him to earn a lot of money to finance his lifestyle. Now he has five children and lives in a villa.
Most people, on the other hand, do not have a precise life planning at such an early age. Instead, they live in the day without having any real goals. Some even develop their life planning much later in life. It is also not so easy to find out what you actually want in life, especially at a young age.
We surely remember the question when we were still in elementary school: What kind of job do you want to have one day? Probably less than 10% work in exactly that profession today. In the course of our lives, our wishes and dreams change constantly. That’s why it’s important to constantly adapt our life planning to the current circumstances.
For simplicity, I will divide this article into four sections. The first section is about private matters, such as family, leisure, joy and happiness. In the second section, I’ll cover all the financial aspects of life planning. The third part includes ideas on how to make your life modern. Last but not least, I would like to address a few very important things that you should definitely take to heart.
1. life planning – private
In the private sphere, many things can be important in life. For one it is the family and for others the leisure or sports. Everyone must decide for themselves what is important. Here are some examples:
- Family with 2 children and many grandchildren
- Family time
- Much free time / little work
- Joy and happiness
- Friends
- Work / Education
- Hobbies / Vacation / Travel
- Health
- Living area
I would like to go into some of them in more detail and give you suggestions on how you can reconcile these points. You don’t necessarily have to cut back, but you may have to make one or two compromises.
a) Health
The older we get, the more we realize how important it is to be healthy. Beyond the age of 40, it slowly starts to pinch a little everywhere, the back hurts, and so on. Maybe we already have one or the other chronic disease like diabetes or something else. Then we have to learn to take care of our health.
But we should also take precautions at a young age if we want to enjoy our old age. I can tell you from my own experience how important it is to take time out and not overload yourself. Take care to avoid stress and find enough time to relax. Nowadays the demands at school and at work are getting higher and higher, so that the pressure to perform is growing. In addition, we are constantly reachable by cell phone and take less time to “do nothing” than 20 years ago. But this is very important to recharge our batteries.
For this, you should include the following things in your life planning so that you can live a healthy life.
- Sport and exercise
- Sufficient sleep
- Morning routine
- Healthy diet
- Doing “nothing” more often
b) Family
No matter what age we are, the family plays an essential role for all of us. Be it in childhood, when we are still dependent on our parents, or when we are parents or grandparents ourselves. The family is our anchor in life, which holds us and with which we go through thick and thin. We probably spend the most time with the family in our development and that is why it is so important that you have a harmonious family life. In the comfort of the family lies the key to your inner well-being.
Of course, it’s not always easy to balance family and work. Both take up a lot of time, so it is important to organize well. Giving your family members your full attention is more important than spending time together. In order to strengthen cohesion, it is especially important to pursue common interests and gain experience together.
Live actively and consciously instead of spending most of your time in front of the TV. Do something together in nature, it strengthens family bonds and you relax at the same time. Of course, in every family there are quarrels and frictions. Before you criticize your family member, you should always put yourself in the other person’s shoes. In addition, you should first ask exactly whether you have understood correctly, before you react with reproaches. This can help to prevent the dispute.
You should take the following points to heart in your life planning in relation to your family:
- Try to have harmonious family life
- Give your family members your full attention
- Respect each other
- Be active and gain shared experience
- Staying relaxed when it comes to arguments
c) Friends
Away from family, good friends are a very important social component in our lives. When I enter a retirement home or similar facility, I feel quite emotional. Many of the residents are there all alone with no real friends and are often rarely visited by family. That is very sad to see. So that we don’t feel the same way in old age, and so that we don’t become lonely even in our younger years, it is important to make new friends and to maintain friendships.
Become active yourself in the search for new friends. If you are only at home, you can not make new friends. Go after your hobbies, there you will meet people who have similar interests as you. Don’t wait for the perfect friend, you will most likely not find him easily. Instead, be open and take every chance for new friendships. Not every friendship is perfect, but the more your circle of friends grows, the more likely it is that the right person will be there.
Germans have one good friend and 4 close friends on average. Their circle of friends includes an average of 11 people. When I look at the numbers like this, it’s no wonder to me that Germans become lonely in old age and are also lonelier compared to people from other countries. In Brazil, for example, the numbers are at least 3 times as high as in Germany. Here the cultural differences become visible. People in Brazil not only have more friends, but are also happier because of their many relationships.
For this, there are some rules that you should follow so that your circle of friends grows. This should be a very important part of your life planning. If you would like to delve further into the subject, I can recommend the somewhat older but still current book by Dale Carnegie “How to Win Friends & Influence People”.
- Take an interest in others
- Give honest and sincere recognition
- Be loyal and reliable
- Let others speak about themselves and listen well
- If you are wrong, admit it
- Praise even the smallest success
d) Free time
Leisure time is another important point for your life planning. By free time, we generally mean the time we don’t spend working or doing other important things, like going to the doctor and so on. It is the time we spend with friends or family, but also with things we like to do ourselves, like reading or doing sports. Your free time is very important for regeneration and recovery, not only the time of sleeping.
However, many are so exhausted from work that they first need to relax in the evenings and on weekends and then spend the time in front of the TV. Others, on the other hand, are so active that they plan every free minute of their free time. You have to try to find a middle way so that on the one hand you give your body enough time to recover and on the other hand you do enough activities that give yourself pleasure.
If your work-life-balance is not aligned, then this can inevitably lead to illnesses that are triggered by stress and overload. These would be, for example, gastrointestinal problems, back pain, neck tension or worry/anxiety.Therefore, it is even more important to actively deal with what you really enjoy. For example, you can ask yourself:
- What hobbies do I like to pursue and do I take enough time for them?
- Am I doing enough sports and which ones do I particularly enjoy?
- Am I taking enough time for myself?
- What activity makes time fly by and I can forget everything around me?
- Do I feel better after an activity than before?
Try new things and take time to pursue your old hobbies. Find out for yourself what does you good. Be it a morning routine, tennis or anything else. The most important thing is that you feel better doing it and afterwards.
2. life planning – financial
As you have seen in the points above, the most important part of your life planning is in the private sphere. However, a good financial situation should give you security and the possibility that you have more time for your free time. Your time on earth is finite. This means that you only have a certain amount of time to do the things you like to do. But if you spend less time working and earning money, you have more time left for the good things in life.
If your financial situation is tight, you will have to cut back a lot and possibly take on another job. This means that you then have less time available. But if you have some financial security, you can be a little more relaxed. If you have so much money that you no longer need to work, then it is time to think about new hobbies or setting up a foundation to do good.
In your life planning, you must naturallyproceed in small steps. Do not set your goals too high, but move forward step by step. In this way, you will also achieve your wishes more quickly and can set the next higher goal. In the following I will show you the individual intermediate steps.
a) Financial cushion
A certain financial cushion should be the first step in your financial life planning. Before you invest your money in various investments, you must first put money aside, even if you receive no or very little interest. This financial cushion is intended for emergencies or when good opportunities arise. This way you avoid liquidity bottlenecks and do not have to sell investments if the worst comes to the worst. You have money quickly available at any time when you need it.
As soon as you have to use the financial cushion, you should replenish it immediately so that it is available again. This cushion gives you a little security, for example, if you lose your job. You can sleep more peacefully and without worries, which is much more important than the profit on this money.
It makes sense to set aside at least 6 times the amount of your monthly expenses. This would allow you to live on your savings for half a year without any worries in case of an emergency. If you are a little more conservative, you can set aside 12 times that amount. For example, if your monthly expenses are $3,000, then your financial cushion should be at least $18,000 or $36,000.
| Monthly expenses | 6-fold financial cushion | 12-fold financial cushion |
| $3,000 | $18,000 | $36,000 |
b) Financial security
The next step in financial life planning is financial security. This means that you can live on the income from your investments if you limit yourself and spend only what is necessary.
This income can be for example from interest, rental income, dividends or the sale of a part of your financial investments. However, your financial investments should not become less, but you withdraw only a very small part. For example, if you earn an average return of 5% and withdraw only 3%, you ensure that your investments continue to grow. You still benefit from the compound interest effect.
But what are the most necessary expenses? Imagine you live on a student level and add up all your fixed and variable costs. With a budget book it is very easy to show your expenses. You simply add up the most necessary expenses and then you know how high these expenses are.
Now that you have determined your expenses, the next step is to determine the savings amount you need to cover your monthly expenses. Let’s assume that your expenses are $1,500 per month, then we need a factor that we can use to determine the savings amount. With a withdrawal rate of 3%, the factor would be 100/3 x 12 = 400. The sum for your life planning would then be $600,000. With a withdrawal rate of 4%, the factor would be 100/4 x 12 = 300 and thus $450,000.
| Monthly expenses | Savings – 3% withdrawal |
| $1,500 | $600.000 |
c) Financial independence – freedom
If you have achieved financial security, then you are already quite a bit more flexible in your life and can think about taking a sabbatical, longer parental leave, a reduction in working hours, or similar. If you want to have more free time in your life, or if you want to have more luxury, then you have to put more money aside. Of course, you not only have to earn more money, but also save it. Here, an account model or account system can help you.
We talk about financial independence when you can live on the saved amount with a normal lifestyle. This would be, for example, the cost of a normal apartment, a car, a few trips a year, eating out, and so on. Let’s assume this sum would be, for example, $4,000. Then add another 25% security and you would then need $5,000 per month. Now multiply that again by 400 and the total would be $2,000,000. That’s far less than you probably would have thought, right?
You will only achieve financial freedom with a much higher sum. If you want to afford more luxury, such as a very large house, additionally a vacation home, a sailboat or similar, then of course it costs extra. For everyone this sum is of course different. You have to determine that for yourself individually or you can take a look at the financial freedom calculator for your life planning. Let’s assume that the monthly costs would be $20,000. Then you would have to save a whole $8,000,000.
| Monthly expenses | Savings – 3% withdrawal | |
| Financial independence | $5,000 | $2,000,000 |
| Financial freedom | $20,000 | $8,000,000 |
3. Other models
In addition to financial life planning, there are of course also mixed forms or other options for reducing your working hours and taking time off. Or maybe you want to retire earlier or work part-time. For each model, you need a certain amount of equity or you simply reduce your expenses.
For example, let’s say you quit your job to go on a trip around the world and rent out your apartment to a subtenant during that time to cover costs. During the one-year trip you sleep mainly in youth hostels and cheap accommodation, then you would have to expect about $1,500 to $1,800 per month. To be able to afford the trip you would then need about $20,000.
But if you put your great experiences, beautiful moments, new friendships and other positive effects against it, then this trip is practically a gift. All that you have experienced there, no one can take away from you and you can draw on it for a lifetime. Maybe you should include this in your life planning.
a) Reduction of working time – time off
Another model of life planning can of course be that you want to reduce your working hours. This will give you more free time and you will have more time for your friends, family and to take care of your health. To be able to afford this, you need to save money beforehand and/or you simply reduce your expenses. But what options do you have?
On the one hand, there is the classic part-time. Part-time employees earn an hourly wage as opposed to a salary. An individual who works part-time has tax advantage. By working part-time, you benefit from less stress, more rest and much more time for private matters.
As an employee, you have the opportunity to take parental leave for up to 12 weeks per child. This is a unique opportunity that you should not miss. On the one hand, you have more free time and on the other hand, you are actively involved in the development of your child. In the US the leave is very short compared to other countries in Europe. I know many families who have made a world trip or something similar during this time and all of them would definitely do it again.
You should definitely include one or more sabbaticals in your life planning. According to one study, more than 50% of all Americans would like to take such time off for their mental health and to reduce stress. Today, many employees offer such a sabbatical year to their employees thanks to flexible work schedules. With many of these models, you continue to receive your full salary. Check with your employer and don’t miss out on this unique opportunity or otherwise you might regret it later.
b) Modern life planning
Many of you have probably already thought about retirement at 40 or read about it. But is retirement at 40 still in line with the times, or is it even feasible for the average person? Many dream that they can stop working early and then have time for relaxation or leisure. But often, by the time they are 40, they still don’t have the necessary pocket change, or they want to accumulate more and more money. Then they are 50 and still work full time, and so on.
But why not take time off earlier when the kids still need their parents and you can have a great time as a family. Why do we have to save X amount first and then stop working. For example, you can start working less and only 4 days a week when you reach financial security. Or you can look for a job that is a little more relaxed or where you have to travel less.
If you have saved up even more, then maybe it’s time to reduce your working hours even further or take a longer break. How about a sabbatical, parental leave or unpaid vacation? Design your life planning flexibly and don’t stick to the rigid system. Let your assets work for you and do what you always wanted to do without putting it on the back burner.
The closer you get to financial freedom, the more you should try to make your money work for you and give yourself more freedom. You’ve almost arrived at the safe haven and now it’s time to really only do what fulfills you and is fun. Work only 1-2 days a week and use your free time to do good or pursue your hobbies.
If you choose this modern form of life planning, then it will be easier for you to get used to the free time. Many retirees, for example, have the problem that after 40 to 45 years of work they don’t know what to do with all that time. With a smooth transition it will be much easier for you.
4. What is really important in life?
What would be your answer? Health, family, love and success are at the top of people’s lists in life planning. But are these the most important ones? Of course, all of them are very important, but I would like to tell you a few more here that you might not have thought of right away.
A very important aspect is that you never stop working and learning. How is this to be understood? Let’s say you are a 60 year old retiree with a house by the sea. Your daily routine consists only of walking, eating and watching TV and sleeping. On the one hand, you get bored pretty quickly and on the other hand, so does your brain. If you don’t exercise your body and brain, then your body and mind will degrade very quickly. That’s why lifelong learning and working is so important.
You should always adjust your life planning so that you always have a task. When you no longer feel needed or have goals, people tend to become depressed and in the worst case they will die early. They feel inferior, rejected and become lonely. To prevent this, you must always set new goals and tasks, whether it is learning a new language (yes this is possible even at an advanced age), further education and so on.
Try to implement modern life planning and do not stick to the rigid patterns that society perceives as “right”. It is your life. Create it the way it suits you and remember that you only have to justify yourself to yourself and no one else.
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