The fact is investing isn’t just about making your money work for you. It’s about making your money work for you for a particular purpose. In other words, you need a goal. Here are four specific reasons why a goal-focused approach to investing is important.
Because It Puts You in Control
When you first start investing, you may feel like you have little control over what happens to your money. No matter how careful you are, you could lose what you invest. But if you take a goal-focused approach to investing, you’re not just watching the value of your portfolio rise and fall based on the whims of the market. You are making specific decisions designed to help you reach specific goals. If something’s not working, you can change the plan.
Because It Will Be Easier to Save
Saving money just to save money is no fun for most people. Having concrete goals can turn saving from an abstract concept to a specific step needed to achieve a certain aim — like being able to retire one day, take a trip around the world, or send your grandchildren to college. And studies have shown that the better you are at setting goals, the more you’re likely to save. You might even do better by focusing on the intermediate steps on the way to your larger goal.
Because You’ll Be Less Focused on How Others Are Doing
If your father-in-law is bragging about the great return he got on his investments, it can be tempting to drop your plan and copy his moves. But if you’re investing toward a goal with a clear plan, you’ll be able to congratulate him on his success while staying focused on your needs.
Because It Will Help You Weather Market Fluctuations
The market goes up and the market goes down. Sometimes, it goes way, way up or way, way down. Just like a roller coaster, these peaks and dips can make your stomach do flip flops, especially when your life savings is on the line. But having a goal-focused approach can help you cope with those ups and downs. If you know that you won’t need your money for another 30 years, you can handle some volatility today. But if you’re going to need your money in the next couple of years, you can select less-volatile investments, so that the day-to-day movements of the market won’t cause more stress. Knowing your specific goals will help you choose the right investments. If you need help setting your investing goals, please call.