What’s my goal?
Goals are important. There’s nothing quite so satisfying as setting out to do something and then succeeding.
Having a goal, rather than just ‘trying to do better’ makes a difference.
If you don’t know what you’re working towards, you’ll never know when you get there. Human nature means we tend to work harder if we’re aiming for something specific.
We’ve probably all set a goal at some point in our life: like collecting a full album of stickers, clearing the garden up for spring or redecorating the lounge in time for Christmas. Investing is just like that. You decide what you want to achieve and then work towards it.
To get you thinking about what a good investing goal may look like for you, here are some goals that might sound familiar and how they relate to investing. There are lots of different goals you could have. Yours will always be personal to you.
Remember too that the value of investments goes up and down and you can get back less than you put in. If you can’t commit to investing for at least five years, and don’t want to or can’t take the risk of losing any money, investing may not be the right way to meet your goal.
1. The getting in shape goal
You want to be healthier and feel better in general. You might not have a clear end target in mind. You’ll see where it leads to. But you do commit to specific shorter term targets – say giving up biscuits, cakes and unnecessary snacks, or going on a 30 minute walk every day until your holidays. Then you review things, make any adjustments and keep going.
It’s important to look after your well-being. That goes for your finances too. So a good way to start investing can be as part of a general goal to get your finances in better shape.
Putting your mortgage to one side, paying off any debts is a good starting point. Other than special deals, you’ll nearly always pay more in interest on debts than you’ll be paid for savings. And making sure you’ve got the equivalent of a few month’s salary tucked away in cash can also be a lifeline (we usually suggest at least four months of your normal outgoings as a sensible amount to aim for).
Alongside this you could start investing for ‘the future’. Commit to making regular payments for a set period of time, then review your progress and take it from there. Consider upping your payments when you can afford to. As the old saying goes, from little acorns, mighty oak trees can grow. Of course, it’s not quite the same as investment values can go down as well as up, but hopefully you get the general idea.
2. The targeted bucket list goal
You’ve always wanted to walk to Machu Picchu or see the sun rise over the Taj Mahal. Going on a special trip is a goal that many of us have.
In investing terms this is all about having a specific goal that you want to meet in a specific timescale and then working actively towards it. That goal could be anything. The deposit to buy a house or a car, to pay for home improvements, to provide for something in your child’s or grandchild’s future or to go on that bucket list trip of a lifetime. It’s up to you.
The point is that it’s specific, and it’s on a timescale so you can measure your progress towards meeting it easily. This can help bring your financial priorities into focus and motivate you to keep at it even if the going starts to feel tough.
3. The ambitious stretch goal
You’ve decided to train to run a marathon in the best time possible. OK, a marathon will be beyond most of us. Perhaps a 10k might be more like it. But whatever it is for you, this is a goal that demands some serious advance planning and commitment to the cause.
The financial equivalent might be something like paying off your mortgage by age 50, having enough to give up work altogether by age 60 or having a new dream home to enjoy in later life. It’s the type of goal you might work up to once you’ve got your finances in shape and tested yourself with some specific goals. Or you could just throw caution to the wind and go for it if you’re the sort of person that relishes a stretching challenge.
This goal is going to impact all your financial decisions. Your whole financial life is structured around meeting it. It might involve investing as much as you can each month, taking money out of existing savings and investing it instead, actively seeking out investment opportunities and being prepared to take on some extra risks to increase your potential.
Once you’ve got an idea of your investment goals it’s time to consider how to go about choosing the right investments for you.