Before you invest a single dollar, it's helpful to figure out exactly why you're investing, says Brenda Schmitt, ISU Extension and Outreach Family Finance Field Specialist.
List all the things that you want to do in your life, and list the cost of each. Use time frames to help organize your goals and future plans into short -, medium-, and long-term goals. Putting goals on paper reminds you of their significance and can motivate you to do what you need to do to achieve them. Most individuals have more than one investment goal. However, do not to have so many that you become discouraged. You are more likely to achieve your investment goals if you set a realistic and achievable time frame in which to get there.
Short-term goals are those that can be accomplished within the next two to three years. Setting a specific dollar amount for a car in two years is a short-term goal. Generally, stable and more conservative investments like a savings account are used to achieve short-term investing goals.
Medium-term goals are those that could be accomplished within the next three to ten years, for example, you may want to put a deposit on a house or set up a business in the next 3-5 years. Generally, a mix of conservative and income-producing growth investments are used to achieve medium term goals.
Long-term goals are those that take more than ten years to accomplish, for example, saving an amount for your children's education, a beach house or your retirement. Generally, long–term investors are willing to invest in growth assets such as shares or property.
Investment goals should be SMART – specific, measurable, attainable, reviewed, and time-related. A specific goal is one with dollar amounts and dates established for an identified purpose. Decide on a regular amount to invest weekly, biweekly, or monthly to accomplish your goals. Be realistic and establish attainable investment goals given your financial situation. Review your goals regularly, for example, annually, to see if you are on target or whether revisions need to be made in your investment plan.
Have a timeline for accomplishing your goals. For example, suppose you want a retirement nest egg that will yield $1,000 per month to supplement your pension. If you plan to retire in 20 years, you will need to put $150 a month in investments averaging a 10 precent return to have a $114,000 nest egg at retirement.
No one should jump into investing without a safety net. Before you start taking even conservative risks with your money, you need to establish a firm financial foundation that includes an emergency fund. Most financial experts suggest medical insurance for you and your family and at least six months of income sitting in the bank or in extremely low-risk accounts like CDs (certificates of deposit) and money market account. Once you've established this foundation, start investing with what you can spare -- as little as $25 a month.
Beginning in January, an 8 week series of online classes will be available through Iowa State University Extension and Outreach. For more information on specific topics and registration information, contact your local ISU Extension and Outreach office and ask about the RETIREMENT: Secure Your Dreams program information. Or contact Brenda Schmitt at 641-512-0650 or schmitt@iastate.edu.
Comments
Submit a CommentPlease refresh the page to leave Comment.
Still seeing this message? Press Ctrl + F5 to do a "Hard Refresh".