If you want to be a successful investor, you’ve gotta set financial goals. Here’s a list of common financial goals for investors to help you get started creating your own.
Individual goals are going to differ based on your personal priorities, age, income level, and other factors, so it’s essential to align financial goals with your own values and circumstances.
Tips For Success
Financial goals should be specific, measurable, achievable, relevant, and time-bound (SMART). Setting clear goals helps create a roadmap for financial decision-making and provides motivation for saving and investing.
If you have any high-interest debt — like credit cards — it’s really important to get that paid off before you begin investing. That interest adds up and takes away from the money you’ll make investing.
Short-Term Goals
These goals require shorter investment horizons and liquidity.
I’m giving you a few examples, but this isn’t all inclusive. You should be able to extrapolate this concept to your specific situation if necessary.
If you plan to retire in a few years, that’s going to end up in this category.
A Down Payment On A House
Many people need at least 3% of the total loan they intend to take as a down payment to buy a house. If you decide you need more than that, adjust your calculations accordingly.
For example, a $200,000 loan, you’d need $6,000.
Buying A Car
Whether you need to save for a down payment or intend to buy a car outright. (Which I highly recommend to avoid wasted money paying interest.)
A Dream Vacation
Ahhh, a fellow travel lover. I hope you’re planning to go somewhere EPIC!
Building an Emergency Fund
Saving an adequate amount of money to cover unplanned expenses, such as medical bills, car repairs, or job loss. Having an emergency fund does wonders for your stress levels when the unexpected happens.
Experts suggest having enough money set aside to cover at least 3 to 6 months of living expenses.
Long-Term Goals
These goals require longer investment horizons, but don’t let that make you lazy. Get clear and specific with the amount of money you’ll need and when you need it by.
You want numbers to move on to the next steps of the Investment Planning Process.
Note: Any one of these can fall into the short term section if your time horizon is a few years out.
Education Funding
Saving and investing for educational expenses, such as college tuition for children or personal development courses, is a common financial goal for many people.
Retirement Planning
A primary financial goal for investors is to plan for a secure and comfortable retirement. What does this look like? Try to get as detailed as possible, so you don’t miss any important expenses.
This usually involves setting aside funds and investing them strategically to ensure a steady income stream during retirement years.
Income Generation
Some people don’t want to wait until retirement to generate consistent cash flow. This goal is easier to quantify than breaking a lump sum into disbursements.
Calculate your needed monthly income for the lifestyle that you plan to live when you plan to start cashing in dividend and interest payments.
Wealth Accumulation
Many investors aim to accumulate wealth over time by steadily growing their investment portfolio. They seek to generate substantial returns to increase their net worth and achieve financial independence.
It may be helpful to break this one down into milestones versus just having one set goal.
Capital Preservation
Some investors prioritize preserving their capital and safeguarding investments. Outline what this means to you. Yes, you wan to protect your initial investment value, but within what window range?
We’ll get more specific with risk tolerance and other preferences in the next steps of the Investment Planning Process.
To Sum Things Up
It’s important to take time to think about your aspirations and set tangible numeric goals. This provides the right foundation to build your investment strategy and move forward.
It’s perfectly normal to have multiple financial goals simultaneously. You should also revisit them at regular intervals as your circumstances change to readjust if needed.
