Investing Basics: Set Realistic Timely Goals

While some people are old hands at investing, others are completely new to the idea. If you happen to fall into the second group you should consider setting some goals to help you start up your new investments. Goal setting is one of the best tools you can use to ensure you can save what you need for a wide variety of events and occasions.

What is an investment goal?

Put simply, it is a goal that gives you a set financial target to hit within a set period of time. For example you might aim to save $5,000 in 12 months, or $20,000 in 15 years. There are all kinds of financial goals you can set in this regard, but you must also know why you are saving the money.

For instance you might be saving money to get married, or perhaps to get your child through college. Another good reason to set a short term financial goal would be to save enough cash to buy a car. Provided you have those three things – a set amount, a goal and a time by which to achieve that goal – you can start to focus on how you can amass the cash you want.

Breaking it down

The next step in investment basics is to work out how much you will have to save each month in order to hit your target. So if you have 5 years to save in, this equates to 60 months. Fifteen years would work out to 180 months.

Of course you also have to think about the return you will get on your investment. Some people will automatically go for a guaranteed – and therefore safer – investment than others. If you are going to choose investments with more risk involved, it is wise to make sure you spread that risk over more than one type of investment. Think of it as spreading your eggs around so you won’t break all of them if something should happen.

How many investment goals should you set at once?

In reality the only limit to setting investment goals is your financial situation. Obviously you can’t set goals to save $50,000 a year if you only make $40,000.

But you should focus on three specific types of goals:

  • Short term – say, within the next 12 months
  • Medium term – within 5 years or so
  • Long term – long into the future, for retirement perhaps

Most people can think of goals to set up for each of these time frames. If the idea of setting three goals is too much to focus on initially, try setting a short term goal first. This could be for something as simple as going on vacation. Get a rough idea of the amount of money you would need and when you would like to go, and set your goal for monthly savings accordingly.

The more practice you get at setting goals, the easier it will be to reach each financial goal successfully and in plenty of time.

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