One thing I ask all my clients, regardless of what life stage they are in, is whether they have personal financial goals. I know firsthand that setting tangible and realistic goals, following them, and tracking their progress is the key to success. Financial plans thrive on goals.
For married couples, I strongly advise them to discuss, develop and review financial plans together. Like many other aspects of marriage, communication is critical. Without shared goals, it is nearly impossible to achieve a successful financial plan.
Most goals fit into one of three categories. The general rule to follow is that the more time you have to reach a financial goal, the more investment risk you can afford to take.
Short-term goals (less than three years)
- The closer you get to your goal, the less risk you want to take with the money you've already accumulated. That money set aside will be spent relatively quickly, so you'll want to focus on safety and liquidity rather than growth in your short-term portfolio. It's often a good idea to put your money into a federally insured bank or credit union accounts or cash-equivalent investments.
Mid-term goals (three to ten years)
- Choosing the right investments for mid-term goals can be more complex than those for short- or long-term goals. That's because you need to strike an effective balance between protecting your accumulated assets and achieving the growth to build those assets.
- Mid-term goals are typically those for which you need time to accumulate the money. The more time you have, or the more flexible the timing, the more risk you can probably afford to take with your money.
Long-term goals (more than ten years)
- For many people, the number one long-term goal is a financially secure retirement. When your goal is paying for college, for example, you think about the costs for four years—or perhaps a few more for a post-graduate or professional degree. But when you think about retirement, you have to think in terms of managing expenses for 15, 20, 30, or maybe even 40 years. Since you'll need income for that entire period, it's important to make your money work for you to grow over time.
Keep in mind that no goal is short-, medium- or long-term forever, and so the timetable for your financial goals will evolve over time. For instance, retirement will be a long-term goal when you're 35, but will probably be a short-term goal when you're 65. Similarly, paying for your child's higher education will be a long-term goal when she's a baby, but a short-term goal when she's a high-school sophomore. So your investing approach—and choices—should evolve as you draw closer to each of your goals.
Have questions? Get in touch today! We can meet at my office or another location convenient to you. I offer investment advisory services to help with your financial planning. Together we can develop a timeline for your financial goals that
Material discussed is meant for general illustration and/or informational purposes only, and it is not to be construed as investment, tax, or legal advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice.