Common Investment Goals
Go out into your yard and dig a big hole. Every month, throw $50 into it, but don't take any money out until you're ready to buy a house, send your child to college or retire. It sounds a little crazy, doesn't it? But that's what investing without setting clear-cut goals is like. If you're lucky, you may end up with enough money to meet your needs, but you have no way to know for sure.
Setting investment goals means defining your dreams for the future.
If you are married or in a long-term relationship, spend some time together discussing your joint and individual goals. It's best to be as specific as possible. For instance, you may know you want to retire, but when? If you want to send your child to college, does that mean an Ivy League school or the community college down the street?
You'll end up with a list of goals. Some of these goals will be long-term (you have more than 15 years to plan), some will be short-term (5 years or less to plan), and some will be intermediate (between 5 and 15 years to plan).
Once you organize your goals by their time horizon, you can then decide how much money you'll need to accumulate for each.
At some point, you'll probably want to buy a home, a car, maybe even that boat that you've always wanted. Although they're hardly impulse items, large purchases often have a shorter time frame than other financial goals. Often, one to five years of planning time is common.
Because you don't have much 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, highly liquid investments that have some potential for growth, but that offer you quick and easy access to your money should you need it.
Related Links:
- Why Invest?
- Common Investment Goals
- Building on Your Foundation
- Asset Allocation
- Handling Market Volatility
- Cash Reserve
- Establishing a Budget