Saving, Managing Debt, and Budgeting
Setting Your Investing Goals
What are some basic steps that I can design in order to attain my personal financial goals?
There are several steps we all should take in order to be successful at creating and reaching our financial goals. We should begin by thinking of and assessing our attitudes toward money, and focus on what thoughts or attitudes seem to be blocking our ability to attain our financial goals. Many of these concepts started at an early age, by observing how our parents and other significant players in our lives dealt with financial issues. All the beliefs and attitudes about money that are blocking us can easily be changed. We should begin to read and learn about personal finance by using information that is available to us, such as by searching the Internet, reading magazines on personal finance, paying attention to the business and financial section of the newspaper, and watching personal financial shows on TV and online.
It may seem a bit intimidating at first, but after a while, the information begins to make sense. You begin to see how small economic changes affect variables such as today’s stock price, but not next year’s stock price. You begin to see which economic variables affect each other, why the price of oil is so critical to the economy, or the effect of the interest rate in a capital such as Tokyo or London. You should assess your financial picture and have a truthful and open view of where you are in terms of your income and expenses. You should seize every opportunity to improve your income. You should look at your expenses and discover the overages. You should see if you have at least six months of emergency funds set aside—in case of a job change or other life event—so that you can easily ride through it. And you must consider paying yourself a certain percentage of your income each pay period first, never touching these funds unless they are to support some financial goal, such as education, retirement, etc. You should design attainable short- and long-term goals. This allows you to build confidence that you can attain a goal before moving on to the next. It allows you to visualize a long-term goal, and not let your current desire to buy some new thing get in the way of attaining that goal.
Once you have your goals in mind, it is time to execute your strategies to attain your goals. By this point, you have some ideas or strategies in place that help you reach your short-term and long-term goals. You may decide to begin taking money from your paycheck and direct it to a retirement fund. You may decide to sell the leased car, buy a cheaper used car, and begin saving the monthly payment. Suddenly, after 12 months, you find you have an additional $2,400 available to invest. Your personal finance journey also involves learning how to analyze your performance, and how well you meet your short- and long-term goals. Should you sell the investments that are doing poorly in the short term? Do you have too much money tied up in real estate? Should you now move from keeping cash to investing in mutual funds?
It is important to look at the performance of our portfolio in order to make sure it is helping you meet your goals, or make the necessary changes. Finally, personal finance teaches you to have the flexibility to occasionally readjust your goals and strategies, and to make adjustments in both your spending habits and savings habits, depending on what events life throws at you. You learn how to make the right choices at the right times, and see opportunity to improve your methods and strategies as you reach different stages in your life.