Match your financial goals with the right strategies || Darrin Gifford

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To achieve most goals in life, you need some type of strategy. And that’s certainly true for your financial goals. Since you likely have multiple financial goals, you may need to pursue several different strategies – but they all should follow a similar process.

What does this process entail? Here are the basic steps: 

• Fully define each goal. Like most people, you probably have a goal of someday enjoying a comfortable retirement. But have you defined what “comfortable retirement” means to you? Do you plan to spend your retirement years traveling the world, or would you rather stay close to home to be with family members? Would you like to pursue your hobbies? Open a small business? Think carefully about what this goal looks like. 
• Identify the costs. Once you’ve identified a retirement vision, you need to put a price tag on it. How much income will you require? You don’t have to identify a figure down to the penny, but you should be able to come up with a pretty good estimate. A surprising number of people never reach this point – more than three-fourths of pre-retirees haven’t calculated how much they’ll need once they retire, according to Four Pillars of the New Retirement, a study by Age Wave and Edward Jones. 
• Invest appropriately for each goal. Your investment strategy should reflect your risk tolerance and your goals. So, for example, when you’re working toward a long-term goal, such as retirement, you’re essentially investing for growth, which means you’ll accept the level of risk that always accompanies a growth strategy. But when you’re investing for a shorter-term goal, such as taking an international vacation in a few years, you may be somewhat less concerned with maximum growth and more focused on making sure that a certain amount of money is available when you need it. Consequently, you might follow an investment strategy with a lower degree of risk.    
• Understand the potential trade-offs of your financial strategy. Each of your goals may have its own investment strategy, but you still need to look at your goals holistically. So, for instance, if you decide you need to ramp up your investing for your child’s education, will that affect your ability to put away the amounts you’ve designated for retirement? If so, do you have the flexibility to change your retirement plans somewhat, perhaps by working an extra year or so? Of course, this might not be necessary, but it does illustrate the potential impact one choice can have on another.