Setting Smart Goals for Investment

Find the tips on setting goals for investment here!


Setting smart goals for investment means defining your dreams for the future.


Imagine putting $100 under the mattress every month and not touching the money until you're decide you want to buy a house, or a car, or retire.

Will you have enough money? That is what investing is like if you don't set clear-cut goals.

Hopefully, you may end up with enough money to meet your needs, but you can't be sure.

"The tragedy of life doesn't lie in not reaching your goal. The tragedy lies in having no goals to reach" - Benjamin Mays

Successful goal setting may be the smartest thing you can do to lead a comfortable and anxiety-free life.


Setting Smart Goals

If you are in a relationship, put in some time to discuss your joint and individual investment goals. Get tips for setting smart goals from a financial adviser if you feel you need it.

Be as specific as possible. If you know you want to retire, or purchase a vehicle, or go on a vacation, when is that likely? Do you want your children to go on to higher education? If so, when will this happen?

Some smart goal setting activities will be long term - you have more than 15 years to plan, some will be short term - five years or less to plan, and some will be intermediate - between five and 15 years to plan.

You can then determine how much money you'll need to accumulate and which investments can best help you meet your investment goals.


Smart Goal Setting - Investing for Big Items

Somewhere along the line, you may want to buy a house, a car, or whatever it is that you've always desired. Although they're not usually impulse buys, large purchases are usually not something for which you plan for too far in advance - one to five years is a common time span.

Because you have limited time to invest, you'll have to budget your investment dollars wisely. Rather than choosing growth investments, you may want to put your money into less volatile, liquid investments that have some potential for growth, but that offer you access to your money should you need it.


Setting Smart Goals for Retirement

Retirement may seem a long way off into the future, especially if you want retirement to be comfortable.

Some points to keep in mind as you're setting specific retirement investment goals ...

  • Decide how much money you will need in retirement. Many experts say that you'll need about 80 per cent of your current income to maintain your life style.
  • Plan for a longer life. Life expectancy is increasing, so it won't be fun to run out of money.
  • Work out how much time you have until you retire and invest accordingly. If retirement is well down the track and you can handle risk, you might choose to invest in more volatile, but higher growth investments that provide a better return over the long term.
  • Will inflation affect your retirement savings? The higher the cost of living, the lower the real rate of return on investment dollars.

Smart Goal Setting - Saving for Your Childrens' Education

You only have a certain amount of time to save for the College or University education of your children, so goal setting activities should commence early. In fact, for many people, saving for higher education is an intermediate-term goal.

If you start saving when your children are in primary or elementary school, you will have 10 to 12 years to build your higher education fund.

The earlier you start the better. The more time you have before you need the money, the greater chance you have to build a substantial higher education fund because of the magic of compounding.

With a longer investment time span and a tolerance for some risk, it may be sensible to put some money into growth investments.

It should be possible to estimate how much it will cost to send your children to a higher education institution and plan accordingly.

Find out what scholarship or financial aid packages may be available in the future that can help offset part of the cost of higher education.

Although there's no guarantee your children will receive financial aid, at least you'll know what kind of help is available should you need it.

Look into tuition plans that put your money into investments tailored to your financial needs and time frame.

For instance, most of the money may be allocated to growth investments initially using a longer-term value investing approach into equities.

At a later stage, as your children approach college or university, moving into more conservative investments like cash or bonds to conserve capital would be prudent.

How might conflicts between goals be resolved? If for instance you need to save for your children's education and your own retirement at the same time, how will it happen? This needs to be thought through.


To Conclude

Setting smart goals will determine the nature of the investments you undertake. Unless you set investment goals, the funds required to meet your needs in the time available may never eventuate.

Whether the goals are to meet big purchases, children's education or your retirement, time frames can be calculated and approximate future funds required can be estimated.

Setting smart goals for investment now will ensure a more happy, productive and comfortable life in the future.

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