How to Set Investment Goals and Reach Them

06 Aug How to Set Investment Goals and Reach Them

Do you consider yourself a goal setter? Some people love to set goals and find it very motivating whereas others find goal setting to be very intimidating or overwhelming. Either way, if you fail to plan, you’re really planning to fail. And the truth is, if you want to reach a specific investment goal, then you need to write it down and put a reasonable plan in place. Otherwise, it’s highly unlikely you’ll actually reach that investment goal.

Setting investment goals helps you look at where you’ve been, where you are now, and where you want to be in the future. Good investment goals share these three characteristics:

1. You can measure good investment goals.

It’s important that you be able to measure and evaluate your progress toward your investment goals, but if your goals are not specific, that will be hard to do. Setting a goal to “save more money this year” is a great goal but hard to measure. Instead, set a goal to “save $100 per month this year”; you can easily measure whether you reached this goal or not by simply looking at your bank account. It’s also easier to hold yourself accountable when you set measurable, specific goals. Over time, you can always adjust your goals too. For example, you can begin to put away $100 per month, and then the next year, shoot for $150 per month. It’s your money, and you’re in charge.

2. Good investment goals make good sense.

If you set investment goals that are unreasonable or unattainable, then you’re just deceiving yourself. For example, if your goal is to have $1 million in net worth by the time you’re 50 years old, but you’re only saving $2000 per month at a probable return rate toward this goal between the ages of 25-50, then you’re setting yourself up for failure. Instead, you need to either change your goal and expectation or save more money somehow to reach your goal. Check to make sure your goals make good sense and are actually achievable in the real world, not just on paper or in theory. A competent financial advisor can guide you in this area.

3. Good investment goals line up with your long-term plan.

Remember that your long-term plan includes more than just money—it includes joy, happiness, and fulfillment in life. If you end up with a pile of money and investments but you’ve sacrificed your happiness to get there, then your investment goals aren’t lining up with your long-term goal of enjoying your life. So ask yourself some hard questions. Would you be happier with a smaller investment portfolio because you’d be freer to enjoy life? Only you can answer questions like this one and develop goals accordingly. Give yourself permission to adjust your investment goals to line up with your desire to enjoy your life.

Steps to Set Investment Goals

If you want to make your investment goals a reality, you need to:

> Understand the reason you’re investing. When you can pinpoint exactly why you’re investing, you’ll stay more motivated to follow through with it. Do you want to increase your nest egg? Are you wanting to save up for a down payment on a house? Or maybe you want to put some money aside for retirement or the kids’ college fund. It’s important to determine your “why” for investing.

> Write your goals down. Don’t skip this simple step. Writing down your goals triggers something in your brain that helps you move from dream to reality. Take a good look at your current financial situation, and get honest with yourself about what you can and can’t do.

> Start by writing down any short-term goals (within two-five years) such as talking to your employer about a 401(k), consulting your friends and family to find out who they use as a financial planner, or even getting out of debt. Before you begin investing, it’s helpful to be out of debt. Can you be out of debt in five years or less so you can start working on your long-term goals? What exactly do you need to do to get out of debt and stay out of debt?

> Then list long-term goals (after five years from now). Based on where you are in life, your long-term goals will vary. For example, if you’re in your middle to late twenties, a long-term goal could be buying a house. If you’re in your middle to late thirties, you may be thinking more about saving for kids’ college or retirement.

> Finally, get specific. Write down your goals from most important to least important. Then write down how much you want to have invested or saved by when. The “how much” and the “by when” are critical details you need to decide on. For example:

> How much money do you want in your retirement account by when?

> How much money do you want in your child’s college account by when?

> How much money do you need to build your dream house in how many years?

If you’re not sure how to figure out how much money you’ll need to save for retirement or your kid’s college, or you’re unsure how to determine which investments will help you actually reach your investment goals in the time frame you have in mind, contact the good folks at www.russellandcompany.com. Their competent and considerate staff can advise you of your options based on your goals, and they can also help you decide if your goals are doable or need to be adjusted.

Intentionality Is Key

Probably the most important thing for setting your investment goals and reaching them is to be intentional. Nothing happens by chance; it takes intentional action to make your dreams a reality. This will take determination because it’s not a sprint—it’s a marathon. Keep your expectations realistic; you won’t reach your goals overnight. Patience is also incredibly important. Start with something simple that you’re familiar with. And if you’re not sure where to start, reach out to a qualified, caring professional who can make the investment process less intimidating.

This newsletter was prepared by a third party company to be used on the Russell & Company and Simple Money Tips for Women websites.