A 2022 survey conducted by Bankrate found that over half the US population is behind on their savings, whether it be for retirement or something else entirely. Many people view saving for retirement as the ultimate goal, so why are so many people falling short? One answer is the lack of goal setting, which means there’s no direction or rules for saving. Luckily, by setting goals and starting to invest, it’s possible to put saving back on track.
Writing Your Goals
Goals are personal and dependent upon individual circumferences, but it’s important to write clear goals to determine what needs saving up for first – and when. A great way to create goals is to think SMART, which means you end up with Specific, Measurable, Achievable, Realistic, and Time-bound goals.
Organizing Goals by Time
When you’ve got a series of concise saving goals in front of you, it’s important to split them up by time. Short-term goals will include saving for a vacation or putting a deposit down for a car – generally spanning a matter of years. Medium-term goals step this up and might include saving for a wedding or property deposit. Then you’ll have long-term saving goals, which will most likely be for retirement.
Aligning Investments with Goals
Understanding your goals in terms of time allows you to align them with an appropriate investment. If you choose to follow the same strategy for all of your goals, you will struggle to find success. For the most part, choosing an investment strategy involves analyzing the risk involved.
Short-term goals rely on keeping hold of and growing financial assets for use within a few years, which means your money needs to be available immediately. This also means you’ll have to take a low-risk approach like investing in high-yield saving accounts or money-market funds. These don’t bring in high profits, but it’s a secure way of guaranteeing your money will be exactly where you left it.
Medium-term goals mean you can step up the risk a little bit, as long as you have a good tolerance. For example, you can explore investing in high-quality stocks like those that pay dividends. These can be through ETFs, mutual funds, or by investing direct. Alternatively, you can explore options trading, which are a little riskier but bring in high profit if used correctly. To learn more, expert trader James Cordier’s complete guide to option selling is a fantastic resource.
Your long-term saving goals, like retirement, allow you to accept additional risk because you have more time to recover financially. With this in mind, having a diversified portfolio of stocks and other assets will be your best course of action.
Reassess Your Goals Regularly
As time goes on, life will bring about change that may impact your saving goals. Therefore, it’s a good idea to start regularly assessing your goals and adjusting your investment strategies accordingly. After all, your medium and long-term saving goals will eventually turn into short-term.
Everyone can make their money work in their favor through investing, but it has to be done strategically on the back of smart goal setting and future planning.
