The Importance of Setting Specific Financial Goals
Investing is a tricky undertaking fraught with uncertainty and risk. But there is one action people can take to manage the endeavor: set specific and measurable financial goals.
The majority of investors are saving for retirement. Many are also investing for their children’s future education. But as valuable as those intentions are, they are not specific enough.
Instead, people should define their goals within a set time frame and dollar amount. For example: a man investing for retirement can set a more detailed plan to save $750,000 by the time he is 65.
Such a specific goal creates a manageable target based on individual needs, not on generalities. It’s also easier to stick to that goal and stay motivated long term if it is clearly defined.
Other benefits of setting specific measurable goals:
- Evaluating your portfolio and making adjustments is simpler. Having a clear and defined plan enables you to analyze the performance of all your investments in relation to your goal.
- It helps ward off panic during short-term market gyrations. As long as your specific goals are heading in the right direction, you will be better able to handle occasional volatility.
- You are more likely to be confident about reaching your financial goals according to research.
What if you have more than one investment goal? For instance, you want to secure a particular lifestyle for your golden years while also saving to pay for your children’s college tuition.
In that case, you should create separate accounts for each. That’s because the amount of time and money you need for each goal is different. You may have twenty-five years until retirement but only five years until your oldest child starts college. As a result, your investment strategy should differ.
By identifying your broad goals first and creating separate accounts for each, you can set specific measurable targets based on precise needs. You can also track your progress separately and make direct adjustments rather than broad changes.
Perhaps the hardest part of setting goals is knowing how much money you will need and how best way to attain it. With so many investments to choose from and continual market changes, making a realistic plan can be quite difficult.
At Silverman Financial, we can help you set realistic goals and investment strategies to reach those needs. We are experts in financial planning and are eager to meet with you one-on-one to establish a roadmap to your ultimate destination.
