How to Set Your Financial Goals for Retirement
One of the foremost steps toward mapping out a retirement plan that is successful is to sort out your financial priorities. When you set goals and time-frames today, you stand a better chance of creating practical action plans that’ll enable you to succeed.
How do you go about this? Get a piece of paper (or you can create a file on a computer) and separate it into 3 columns with the under listed headings. Outline your goals, putting each of them in the suitable time horizon. You can find some examples listed below.
SHORT-TERM GOALS (WITHIN 5 YEARS)
- Down payment savings for a house
- Take a vacation
- Develop funds for emergencies
- Buy a new car
MEDIUM-TERM GOALS (5 TO 10 YEARS AWAY)
- Start a business
- Return to school
- Buy a vacation home
- Remodel your house
- Save for your kid’s college education
LONG-TERM GOALS (10 OR MORE YEARS AWAY)
- Buy retirement property
- Stop working before I reach 65 years
- Support my kids with deposit on home
- Support aging parent
After that, prioritize the goals in each of the lists as you desire. Then, give an estimate of the probable cost of each goal and establish the amount of funds readily available that can be assigned to it.
Now ask yourself:
How much more money must you set aside to achieve your goals?
Are you on the right track, or is there a need for you to set up a savings plan that is more effective?
CONSTANTLY REMIND YOURSELF OF ALL YOUR GOALS
Long-term, medium-term and short-term financial goals all entail diverse savings and investment approaches.
The kind of investment risk you can afford to take for possibly higher revenues for a long period depends on your time horizon. The longer the time horizon, the more investment risk you can afford to take because investments like stocks which have higher risks have the potential to earn more money in the long-term.
For short-term goals, investments with lower risks may be a better strategy given that you might not wish to risk a quick reduction in value just before you have the need for the money. On the other hand, if you choose to invest your entire assets in conventional investments, you may be sacrificing long-term goals and the higher likely returns provided by higher risk investments.
SPREAD THE WEALTH
A lot of people set aside money as well for multiple goals at once. Figuring out the amount of monies to fix in which type of securities based on the level of risk involved, your financial predicament and the timeline of your goals specifically is extremely important. The aim is to find a balance between the level of risk you’re willing to take and the kind of proceeds you would enjoy receiving.
Ensure you have your Goals and Time Horizons Map around you to enable you to refer back to it and monitor your progress.
Written By 3rd Independent Party
2017-40695 Exp. 10/17