Investing money can have a big impact on your future. It is then important that we have goals so that we have a target to work towards. Otherwise, we will simply be running in circles and not be in the position to get the best returns.
Financial audit
It is important to firstly know your own unique financial position and understand how your money is being spent. Even if you have existing investment accounts or financial managers handling your financial affairs.
Review your bank statements and sure you have a strict monthly budget that you follow. Ensure you’ve identified any areas you could potentially save more money or could potentially shift to your investments on a month-to-month basis.
Another area to review during your audit is to determine whether you have enough cash saved up in an emergency fund. Ideally you want to have 6 Months’ worth of bas living expenses readily available in cash. This is important as other types of investments such as stocks or crypto for example could be volatile and you could end up loosing money too. This is why you should always have cash on hand in case you may need it.
Setting your investing goals
Next step is to determine what your investing goals are. Are you simply trying to preserve your wealth? Beat inflation? Or are you wanting to grow your wealth and at what pace in addition to how much risk you can take. There are different types of investments we can direct our money into, but knowing “Why” we’re doing it will help us to determine the best investment type to put our focus on.
We can also follow the SMART Goals setting framework. Specific, Measurable, Achievable, Relevant, and Time-bound.
Some examples may be:
- Increase savings by putting R5000 per month into an interest-bearing account every month to save a minimum of R60,000 for the year.
- Save R50,000 for a 2-month emergency fund
- Accumulate R1 million in a retirement account.
These goals will help you set a path for your investments and ultimately achieve them since you’re not simply investing blindly. You have an end target in mind and you’re simply following the path.
Remember to ensure you are accounting for your current income as well as your expenses. Let’s say your in some debt and don’t have the funds to invest right now. You can still set an investment goal for example, to pay of a revolving credit loan of R15,000 within 6 Months.
Thereafter you can revise and set new Investment goals. Thus it is important to monitor your progress and not get discouraged. Investing can be a lifelong endeavor.
Remember to also ensure that your Investment goals are are clear and concise and that you are able to make the time to track your progress and ultimately measure the outcome. If need be you may even need to adjust your goals or revise them after a while.
Some common investing goals you can incorporate into your own investing outlook:
- Saving for an emergency fund
- Paying of debts, such as credit card, student, vehicle or Home loans
- Saving for a vacation
- Buying a car or a home
- Saving for retirement
Goals are simple there to help you determine which direction you’re heading to. Without goals you’ll be investing aimlessly and may or may not make a return on your investment, which is the primary goal for investing, so that you can get more in the future versus what you currently have today. In essence, to grow financially.
The above is not financial advice, but a framework you can follow to set your own financial goals. To ensure you set goals specific to your financial situation it is always best to consult a qualified financial practitioner.