Wealth Goals Part II

wealth goals

In our previous entry we covered common goals. Today we will cover how to set those goals and make them achievable.

Define your goal clearly

A wealth goal is the first step that sets you on a path and should also be:

• Specific – ‘To get wealthier’ is not a specific or clear goal, but ‘to achieve two thirds of your previous working lifetime income at 55 when you retire’ is. The earliest you can retire from a defined contribution scheme (i.e. personal pension) is age 55 (rising to 57 in 2028)

• Measurable – Set deadlines for your wealth goals, such as the age at which you want to retire, or the timeline for buying a holiday home

• Achievable – Use your own income (and expected income) to set your wealth goals for the future. Don’t count on inheriting money

• Relevant – Create a personal financial bucket list of wealth goals, but always view it as a flexible document that will change with time as your interests and life situation changes

• Timeline – Identify your time frame by categorising your objectives by short-term, mediumterm and long-term wealth goals to provide focus and to help match your goals with appropriate savings and investments

A financial to-do list provides important action steps that can help you keep your financial plans on track. Some of these include:

• Giving your portfolio a regular checkup to make sure your mix of investments accurately reflects your current goals, time frame, attitude to risk, tolerance of risk and capacity for risk/loss

Taking full advantage of your employer’s pension plan (if you’re not doing this already)

Tracking your spending to see where your money is going

Calculating your net worth so that you understand where you stand financially

Creating a legacy for future generations and/or charitable organisations that reflect your values

As crucial as a financial to-do list is to your long-term financial security, creating a not-to-do list is equally important. That’s because a not-todo

list can help you avoid some of the mistakes that may be keeping you from making the most of your money. For example, do not:

Try to time the market. No one knows for certain which way the market will head next. Instead, be strategic and thoughtful about your investment decisions

Make investing decisions in isolation. Rather, consider how each may impact your overall wealth goals

Delay saving for retirement. The sooner you get started, the greater the impact time and compounding may have on your ability to build financial security for the future

Gain access to your retirement savings unless in an emergency. Taking money from your pension pot is like borrowing from your future to pay for your present needs

Ignore the important role risk plays in your portfolio’s ability to grow over time

Minimise the impact of inflation on your money’s future buying power

Review your investments periodically to make sure they’re performing as expected. If they’re not, be ready to make changes as needed

Changing personal and financial situation

Over time, your personal and financial situation is likely to change. Consider how this may impact your wealth goals, attitude to risk, tolerance of risk, capacity for risk/ loss and time frame, as well as your investment and protection planning requirements. Make sure you have a properly drafted and signed Will. Check to see that your Will (and any trust) accurately reflects your wishes and that the beneficiaries on your pension plans and life insurance policies are up to date.

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