What Are You Saving For?

If you’re like most of us, there is probably something you want to buy or fund in the future. But no matter who you are, or what you want, we all need to follow the same steps to get there.

1. What are you saving for?

The first step for any journey is knowing where you are going. Buying a house, educating your children, a second property or early retirement to name a few. The more passionate and focussed you are about the goal, the more likely you are to stay on track.

2. How much money can you afford to save to meet your goal?

Once you have identified what you are saving for, you will need to take a look at your budget, or create a budget/financial plan, to determine how much money you can set aside along the way towards your goal. The more you can invest in your goal, the faster you can attain it.

3. How long will it take to achieve your goal?

The timing of your journey has multiple variables, but the first is deciding how much time it will take to reach goal. This is called your “time horizon”. The key element impacting your timing is how much money you can save, relative to the size of your goal.

4. How much investment growth/interest do you need to meet your goal?

So, you have determined your goal, how much you can save, and how long it will take to reach your goal. With these answers in hand, you can begin building your investment portfolio. The first decision to make when building your investment portfolio is how much risk – or ups and downs – are you comfortable taking? The first three steps will show you how much growth you need in order to meet your goal, but some might not be comfortable with the necessary risk to facilitate that growth. If you are comfortable with the risk, build yourself a portfolio with a mix of stocks and bonds that will meet your growth objectives, with the least amount of risk possible. If you are not comfortable with the risk; you still have a few options. Extending your time horizon and increasing your savings are the two variables to focus on.

Once you have constructed your portfolio and begun to invest, stay the course and remove your emotions from your decision-making process. Remember your goals, your time horizon, and the risk you accepted. There will always be ebbs and flows along the road, but with the right advice, and a plan that works for you, you’ll be celebrating your achievements before you know it.