By Brian McCann

Learn more about Brian at NerdWallet’sAsk an Advisor.

The secret at the heart of financial planning is one they don’t teach you in the classroom. The secret is that the financial planner’s main job is to help clients develop reasonable expectations about their money, their lifestyle and their future standard of living. This can be tough emotional work.

Take, for example, this hypothetical family seeking to make a long-range financial plan: The parents are in their mid-30s, with two kids and a house that has taken up most of their liquid savings, leaving them with a relatively small amount saved in workplace retirement accounts. To achieve the same standard of living in retirement that they currently enjoy, the family would need to save 15% to 20% or more of their salary in retirement accounts, assuming a normal retirement age of 67.

And since they want to fund their children’s education, they need to save an additional 3% to 4% of their salary in college savings plans. As you can see, the saving component of their financial plan can quickly approach 20% to 25% of their current income.

At this point, a financial advisor delivers the recommendations: The family should start saving a significant percentage of their income, in fact significantly higher than they have been saving up until now, in order to send their children to college and to retire comfortably at 67.

This news is met with crestfallen looks and the inevitable response: “But we were hoping to retire early.”

It is possible to retire early. But our hypothetical couple would have to increase their savings rate or lower their expectations for retirement to do so. By “expectations,” we mean how much money they spend in retirement, of course. But there’s much more to it than that. Tied up in that one little yearly spending number is a host of dreams large and small: trips to Europe, second homes, days on the beach and plans not even made yet. Can we exchange these for a weekend at the lake, an RV and long walks in the park? These are the trade-offs involved in financial planning.

Ultimately, smart financial planning comes down to math. The math associated with investing is not that complex. But many people who seek out financial advice are not interested in the math of investing, and they don’t have the time or inclination to use this as it relates to their own personal finances.

So they ask a financial advisor for help. This is good. The problem is that when they are asked to confront the math, their expectations often don’t line up with reality. Barring winning the lottery or achieving Silicon Valley riches, financial independence requires two things: time and money. You’ve got to feed your program one way or the other.

Consider this relatively modest saving program of $5,000 per year earning 7%. As you can see, starting to save for retirement very early can put you in a good position by age 60:


But starting 10 years later, at the still relatively young age of 30, means you’ll have less than a half-million dollars by age 60:

In fact, if you started saving at 30, to reach the $1 million mark at 60 you would need to save $11,000 per year instead of $5,000. In other words, if you’re not feeding your program time, you’ll need to feed it much more money to hit your goals.

This is, of course, a simple illustration of a complex topic. But the expectations involved are real. Helping people deal with the inherent trade-offs made in saving for the future and enjoying life in the moment are just a natural part of developing a true financial plan.

Even though the initial setting of expectations can be tough, it’s worth it when people make progress toward their financial goals, whatever they are, and realize the pride and accomplishment associated with their achievements.

Brian McCann, CFP, is a financial advisor and the founder of Bootstrap Capital LLC in San Jose, California.

The article Want to Retire Early? You’ve Got to Pay the Price in Time or Money originally appeared on NerdWallet.