Setting Investment Goals

To help get where you want to be financially, it’s important to set goals. And no matter what phase of life you’re in, taking a methodical approach can help make this process a little less daunting. The first step is to determine your financial needs.

Financial needs

Financial needs are very different from financial goals. A need is something you should look at as a regular expense. These most likely include:

• Food
• Clothing
• Transportation
• Rent or mortgage payment
• Insurance
• Building emergency savings

Financial goals

A financial goal is something you plan for, and often can be driven by your financial needs. Some examples include:

• Getting out of debt
• Paying for college
• Saving enough to buy a home
• A comfortable retirement

With smart planning, you can help increase the probability of achieving your financial goals. You’ll want to estimate the amount of time it will take to reach them. You may find it easy enough to save for financial needs and short-term goals, but longer-term goals often require discipline and planning.

Setting and then prioritizing your goals can start you on your way. Be especially careful to discuss plans with your spouse or partner to learn where you have (or don’t have) a shared vision. And think about when you’ll need the money. Are you better off saving in a taxable or a tax-advantaged account?

As you set your goals, be realistic. Don’t plan on achieving unrealistic returns, as markets fluctuate and past performance is not a guarantee of future results. Track your progress. Start with milestones you can achieve and then challenge yourself to do better.

Take advantage of bonuses, raises, or other windfalls to move you further along and monitor your progress at regular intervals. Remember, you’re not only tracking the performance of your individual investments. You need to keep a steady eye on progress toward that goal.