By Josh Patrick
You know you need to put money away. You might want to save for retirement or for your child’s education or just need a rainy-day fund for emergencies. Whatever your target, know that different financial goals require different strategies.
I hate it when a client says, "I have X amount of dollars to invest" and yet won’t tell me anything about his or her goals. I can’t give you a good answer unless I can understand what you’re trying to accomplish with money.
How long before you need the money?
You know you need to put money away. You might want to save for retirement or for your child’s education or just need a rainy-day fund for emergencies. Whatever your target, know that different financial goals require different strategies.
I hate it when a client says, "I have X amount of dollars to invest" and yet won’t tell me anything about his or her goals. I can’t give you a good answer unless I can understand what you’re trying to accomplish with money.
How long before you need the money?
If you’re saving for retirement and are still at least 10 years away from your golden years, my advice is very different than if you want to save for college and need the tuition money in just three years.
More than half of Americans (53%) work toward such long-term goals as retirement savings, college funding, and costs of medical care in retirement, according to a recent Fidelity Investments survey. More than a third (39%) work toward short-term goals such as building an emergency fund or attacking credit-card debt.
Other important questions:
How important are your goals?
A lot of investment managers seem to forget to ask this. You’re probably pretty good at setting the time frame for when you need large amounts of money. Knowing your goal’s importance tells me whether we need to do some financial planning.
Is your goal a want or a need? If the goal really matters, we look not only at the time frame but also a reasonable return for the time and the risk, then figure out whether you’re saving enough money now.
Are you willing to change?
The more important the goal, the bigger your why, the more likely you’re willing to change behavior. If you tell me this goal must happen in the year you specify, you’re likely to sacrifice a little more today for the goal to happen.
Often whether you reach a goal tomorrow depends on whether you sacrifice a little today.
What if your plan doesn't work?
Monitoring comes in here. Don’t look at your investments every day or even every week, but do pay attention to what’s happening generally with those investments. If your returns fall short, something must change.
You might need to change investments or save more. If your nest egg is growing ahead of schedule, you may even be able to save less right now.
The key: You probably won’t get the result planned when you first started. You will make adjustments as you work toward your financial goal. Sometimes you’ll like the adjustment and sometimes you won’t.
Be patient.
When you start investing and saving, it always looks like nothing is happening. Over months and years, you will notice some progress. Then one day you will realize you reached your goal. The patient win this game.
The impatient and those who want immediate gratification will spend an awful lot of time unhappy in investing and saving — and likely stand a poorer chance of reaching financial goals.
Read more: http://adviceiq.com/articles/josh-patrick-investing-know-your-goals#ixzz3Go6qdeIt
More than half of Americans (53%) work toward such long-term goals as retirement savings, college funding, and costs of medical care in retirement, according to a recent Fidelity Investments survey. More than a third (39%) work toward short-term goals such as building an emergency fund or attacking credit-card debt.
Other important questions:
How important are your goals?
A lot of investment managers seem to forget to ask this. You’re probably pretty good at setting the time frame for when you need large amounts of money. Knowing your goal’s importance tells me whether we need to do some financial planning.
Is your goal a want or a need? If the goal really matters, we look not only at the time frame but also a reasonable return for the time and the risk, then figure out whether you’re saving enough money now.
Are you willing to change?
The more important the goal, the bigger your why, the more likely you’re willing to change behavior. If you tell me this goal must happen in the year you specify, you’re likely to sacrifice a little more today for the goal to happen.
Often whether you reach a goal tomorrow depends on whether you sacrifice a little today.
What if your plan doesn't work?
Monitoring comes in here. Don’t look at your investments every day or even every week, but do pay attention to what’s happening generally with those investments. If your returns fall short, something must change.
You might need to change investments or save more. If your nest egg is growing ahead of schedule, you may even be able to save less right now.
The key: You probably won’t get the result planned when you first started. You will make adjustments as you work toward your financial goal. Sometimes you’ll like the adjustment and sometimes you won’t.
Be patient.
When you start investing and saving, it always looks like nothing is happening. Over months and years, you will notice some progress. Then one day you will realize you reached your goal. The patient win this game.
The impatient and those who want immediate gratification will spend an awful lot of time unhappy in investing and saving — and likely stand a poorer chance of reaching financial goals.
Read more: http://adviceiq.com/articles/josh-patrick-investing-know-your-goals#ixzz3Go6qdeIt
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