# Create Your Own Dollar Plan: Step 3

If you like numbers, step 3 should be a fun one! If you are following along with the series, you should have your brainstorming from step 1 and your grid of goals from step 2 done.

Step 3: Calculating Total Cost

This step will probably take the longest of all the steps. Give yourself some extra time to work on the calculations.

Here’s what the new worksheet will look like:

Goals Time Cost Priority Total Years Total Cost Monthly Savings

Assign number of years. Begin by assigning the ideal number of years from now that you would like to meet your goal.

Calculate total cost. To project the total cost there are a variety of financial calculators I have used in the past to get you started. In addition dinkytown has many more. Don’t forget to account for inflation if the goal is long term.

Some of the goals may take some time to figure out. For example, determining how much you need in retirement. Take time to work through these carefully. The more time you spend on this step, the more accurate your dollar plan will be.

Calculate monthly savings. Find the monthly savings needed for each goal. Use a savings calculator that gives you the monthly amount or a savings calculator where you enter the monthly amount and adjust it until the total costs match.

For the interest rate, assign a number that corresponds to the length of time you will save, the type of savings and your risk tolerance. For example, if you are saving for a car, you would probably use a savings account which has a lower interest rate than stocks. You might use stocks to save for retirement. In the past I used 2 or 3% for savings and 8% for investments in stocks.

My Example

Here’s an example of what my chart might look like. I made up numbers for the illustration. The total costs for both houses are down payments only.

Goals Time Cost Priority Total Years Total Cost Monthly Savings
Early Retirement 1 9 9 19 20 \$1 million \$1,758
Build a new house 3 3 9 15 5 \$120,000 \$1,787
Buy a new car 9 1 3 13 4 \$15,000 \$303
Vacation Home 1 3 1 5 10 \$50,000 \$308
Total             \$4,156

I’m going to give you an extra week to work on this step since it’s a more involved one. I’ll be back in two weeks with Step 4! Feel free to ask questions if you need help with this step.

Email:

1. I love doing these kinds of things! And breaking down long-term goals into monthly amounts make them more palatable. I appreciate your car fund – paying yourself a car payment instead of borrowing and paying a bank – smart move!

2. FYI, this post looks pretty funny on themoneywriters.com web site. All it shows is a bunch of syle code for the table.

John Hunter

3. @ Frugal Dad: I learned the car trick from my parents… they always pay cash for their cars.

@ John: Thanks for pointing it out. I got it fixed so it should show correctly in feeds in the future.

4. Thanks for taking the time to put this together and share with everyone. I’m just getting started and this is a great guide so I can reach my goals.

Tina

Tina

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