It is easy to want to skip the step of writing down your goals and jump straight into investing. However, taking time to consider your goals and cement them in writing is a great way to set yourself up for success, whether you are a beginner at investing or a long-time enthusiast. Goal setting is the most important step to being successful and reaching your financial goals. Investing your money can be challenging, as there is a lot at stake, the markets are volatile, and investing comes with a variety of risks. A plan can help you stay on track, narrow your focus, stay motivated, make the right investments, and make better decisions.
Whether this is your first time writing goals for your investments, or your current investment plan is in need of an update, here are some top tips to help you get started.
Why do you need to set goals?
Regardless of the topic, writing goals is vital to achieving anything efficiently. Goals will enable you to evaluate the investments on a regular basis, and ensure they align with your goals. Without any goals, decisions are based on assumptions, which have no direction or clarity. This means your success will be non-existent or take an extremely long time to achieve. Setting clear goals will form part of your overall strategy.
What makes a good goal?
A good goal is one that follows the common mnemonic device known as SMART. Following this technique can help you write more concise goals, that will give you the direction that you need, organize yourself better and work more efficiently to achieve your goals. SMART stands for:
Your goals should be specific. When it comes to your money and investments, you should get clear on how much you want to save or make, what you are planning on saving for and what you want your future to look like. This will help you to create a road map that aligns your current point to your end destination.
Your goals should always be easy to track, monitor and measure. When you know where you are starting from and where you want to end up, you can easily see your progress along the way. You will need to attach specific dollar amounts to all your goals and the steps in between. This will enable you to see how close you are on track, and if you need to make any adjustments to help you reach them. Make sure you come up with a method that makes it easy to measure your progress.
Your goals should always be realistic and achievable. Find a balance between shooting for the stars and aiming high, and ensuring that you are able to reach them, with your resources and time available. If you set goals that are unrealistic and out of reach, you are going to quickly lose motivation and fail. It will also result in you wasting time, effort and resources when you could be putting them into goals that are obtainable.
All of your goals and actions that help you to reach your goals, should fit well with your short-term and long-term goals and values.
You should add an end date to your goals. This will create a sense of urgency for your goals, to help you stay motivated and committed to achieving them. A time limit will also help you track your progress, keep you on track, make better decisions, and enable you to work out how much money you need to save or invest each week or month to achieve the goal.
Questions to ask yourself
When setting your goals, it is important to consider a range of different factors that are going to impact your journey. You may have a goal in mind, but you want to make sure it is realistic, achievable, and something you are comfortable with. Here are some of the most important questions you should consider.
Do I fully understand what I am investing in?
Making investments is a risky activity to get involved with, so it is important that you fully understand what you are doing. Make sure you conduct thorough research when setting your goals, mapping out your steps, and for each individual investment you choose to make. Familiarize yourself with the industry, and how you can benefit from making an investment. For example, if you are going to invest in Bitcoin, you will need to ensure you are aware of the risks, but also the current market prices. You can do this through websites such as Binance.
If you are going to invest in stocks and shares, then you should familiarize yourself with the company, and its financial situation. This will help you to make better decisions, reduce your risks, and meet your goals quicker.
How much risk are you comfortable with taking?
Risk is an inevitable factor when it comes to investing. To help you plan the right goals, and reach them, you should ask yourself how much risk you are comfortable with taking. Figure out what your individual risk tolerance is, how much money you are comfortable with investing, and how much money you are comfortable with losing.
How to set goals for investing
To get started, you should identify your goal and figure out exactly what you want to achieve by investing. Some of the most popular goals include buying a home, raising a family, getting married, starting a business, going traveling, building financial wealth, securing retirement, and much more.
Ask yourself the important questions about your understanding and risk tolerance levels, before filling out your SMART goals. These simple steps will help you create your financial goals, and execute them accordingly.
Investing your money can come with a lot of risks and challenges, which is why getting clear on your vision and setting SMART goals is the best thing you can do. Having a goal, and knowing how you can reach it, will help you get there much quicker and easier. Make sure you don’t rush into investing and take time to put a strategy together.