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 ^{[1]} and your grid of goals from step 2 ^{[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.

**Add to the grid. **Add 3 more columns to your worksheet. The new column headers are years, total cost, and monthly savings. In addition, add a row at the bottom for total.

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 ^{[3]} I have used in the past to get you started. In addition dinkytown ^{[4]} 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 ^{[5]}. 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 ^{[6]} that gives you the monthly amount or a savings calculator ^{[7]} 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.