Setting investment goals is an important task to do. Retirement goals are one of the most important goals that everyone seems to put off. It just seems so far off and the pressures of today are more pressing. I went through school that way. The immediate test or paper was what got the attention. Unfortunately, with retirement investing, we cannot function that way. We need to have such a large nest egg when we choose to retire that we just cannot choose to begin the year before we retire. Also, unlike our parents, we probably should not plan on social security even though the theory behind it was that we would be able to count on it. However, that is a political direction we should not go.

A couple of quotes from the classic “Alice in Wonderland” seem appropriate. The Queen said “Now here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that” Then there is the famous quote when Alice wanted to know which road to take. The answer was “If you don’t know where you are going, any road will take you there”.

Without a set investment goal, you might as well go out to your back yard, dig a hole and every month throw $50 into it. Don’t take any money out until you are ready to buy a house, provide a college education for your children or retire. It sounds foolish but that is in essence what we are doing without a set goal. There is simply no direction to it.

Setting investment goals means sitting down and defining where you want to be and how long you have to get there. You need to dream and also be realistic. For instance, you want to retire but when. How much are you going to need in your investments to be able to retire. What amount do you need to put away monthly and what kind of return on your investment will you need. The answers are a lot different for the 25 year old than they are for the 50 year old.

When looking at how much money you will need, you need to take into consideration the rate of inflation. The $500,000 investment fund may look good in today’s dollars but what will it look like in the year you retire? Also, you need to consider that you will probably live 15 to 20 years past retirement. Are you going to supplement your nest egg by a part time job? You may need to unless you have enough saved up to live off of the interest only.

In short, sitting down with your spouse or if you are in a long-term relationship, your partner needs to be done. And it needs to be done today. You haven’t the time to waste. You may also need to meet with a financial advisor to help you set reasonable goals. This advisor can also help you determine the different asset classes you will need to invest in to meet the desired rate of return. They can help you with the direction you should take, but ultimately it is your goal and your decisions that will get you to the destination you wish to go to. Remember though, that part of the goal is to enjoy the journey.

All of the content published on this website is to be used for informational purposes only and without warranty of any kind. The materials and information in this website are not, and should not be construed as an offer to buy or sell any of the securities named in these materials. Trading of securities may not be suitable for all users of this information.

Before you begin any journey, you need to determine where you are going and how you will get there. You also need to determine the vehicle you will use and how long it will take to get there. Getting to your determined financial destination is the same way. Before beginning this journey, you need to sit down and do some planning. Too many people think they want to invest in the stock market before deciding what they want to accomplish. They end up chasing various stock tips or ideas and getting nowhere. This is similar to just getting into a car and merely driving without a destination in mind. You may go somewhere but in the end, it may not be where you really wanted to go.

The first investment goal is to get out of debt. You may have high credit card debt that is costing you over 18% per year. Investing in a stock fund that pays 10% does not make sense in this situation. Also, you need to invest in a savings plan. You really need to have a financial cushion of 3 – 6 months of savings to cover unexpected expenses. You would hate to have to sell some stock to cover the purchase of an unexpected expense

You then need to determine your short term, medium term and long term goals. You should really have some idea of what you desire in each financial category. Pat Swanson, a Certified Financial Planner and families’ specialist with Iowa State University (ISU), states that “Individuals spend more time planning a summer vacation than they do setting investment goals”.

For example, a short term goal may be a family vacation for the next summer. This will probably require some savings but it should be put into a short term vehicle such as a 6 month certificate of deposit (CD). What I have done is set up three 3 month CD’s. I have one maturing every month. They are also the type I can continue to invest in. That way I can put money away every month and have one maturing each month in case I need the money. The interest rate is lower but it is okay for meeting short term goals.

Saving for a home or a major purchase may be a medium range goal. This may be 3 – 4 years in the future. This can be accomplished by longer range investments such as Bonds, or longer range CD’s. Once again, it is important to realize that if you have invested in the stock market, the stock market may be on a downward swing when you need the money. Therefore, a different vehicle is needed for this type of goal.

Long range goals such as retirement or saving for your children’s, grandchildren’s education are examples of long term goals depending on your age. If your expected retirement is only 5 to 6 years away, this may be considered a medium range goal. However, if it is further, you can consider investing in a higher risk, but expected higher return, investment tool such as the stock market.

You should write each of your goals down. Remember, a “goal not written is only a wish”. You should think about your goals often and visualize how you will feel when they are accomplished. This helps to make the goal real in your mind. You should also not establish conflicting goals. Make them reasonable. Also remember your goals should be Specific, Measurable, Attainable, Reviewed, and Time related (SMART).

A specific goal is one with dollar amounts and dates established for an identified purpose. Make regular deposits into your financial vehicle and be consistent. Reward yourself with some short term attainable goals. It feels good to have accomplished a goal and helps you have the realization that the longer term goals are possible.

If you decide to invest in the stock market, remember it will take some research. You probably invested a considerable amount of time to prepare for your career. Be willing to invest some time in your financial goal career. Do some research read up on different investments including the risk each one carries.

Also remember your investing goals will probably change over time so you should reassess them at least annually. Are you on track or has something changed to require updating your investment priorities. Perhaps a major event has happened that causes you to rethink what you need in life.

Have fun with your goals. This can be a fun time. It is exciting to have a dream and reach it. Remember that life is more than just reaching the final destination, it is having fun along the way.

All of the content published on this website is to be used for informational purposes only and without warranty of any kind. The materials and information in this website are not, and should not be construed as an offer to buy or sell any of the securities named in these materials. Trading of securities may not be suitable for all users of this information.