To achieve most goals in life, you need some type of strategy. And that’s certainly true for your financial goals. Since you likely have multiple financial goals, you may need to pursue several different strategies, but they should all follow a similar process.

What does this process involve? Here are the basic steps:

Completely define each goal. Like most people, your goal is probably to one day enjoy a comfortable retirement. But have you defined what a “comfortable retirement” means to you? Do you plan to spend your retirement years traveling the world, or do you prefer to stay close to home to be with family members? Would you like to pursue your hobbies? Open a small business? Think carefully about what that goal looks like.

Identify the costs. Once you have identified a retirement vision, you need to put a price on it. How much income will you need? You don’t have to pinpoint a number to the nearest penny, but you should be able to come up with a pretty good estimate. A surprising number of people never reach that point – more than three-quarters of pre-retirees haven’t calculated how much they’ll need in retirement, according to Four Pillars of the New Retirement, a study by Age Wave and Edward Jones.

Invest appropriately for each goal. Your investment strategy should reflect your risk tolerance and goals. So, for example, when you’re working towards a long-term goal, like retirement, you’re essentially investing for growth, which means you’ll accept the level of risk that always comes with a growth strategy. But when you’re investing for a short-term goal, like taking a vacation abroad in a few years, you may be a little less concerned about maximum growth and more focused on ensuring that some money is available. when you need it. this. Therefore, you could follow an investment strategy with a lower degree of risk.

Understand the potential trade-offs in your financial strategy. Each of your goals may have its own investment strategy, but you should always consider your goals holistically. So, for example, if you decide you need to increase your investments for your child’s education, will that affect your ability to set aside the money you’ve designated for retirement? If so, do you have the option of modifying your retirement plans somewhat, perhaps by working an extra year or so? Of course, this may not be necessary, but it illustrates the potential impact one choice can have on another.

Track your progress. It’s important to keep track of your investments and investment strategies, but you should be careful when using stock market indices as benchmarks. Your portfolio has been designed based on your risk tolerance and goals. Therefore, comparing it to a stock index (like the S&P 500) is neither relevant nor helpful. Instead, measure your progress at least once a year to determine if you’re on track to achieve the goals your strategy was designed for. When reviewing your progress, you may also want to consider whether any changes in your family situation or employment might affect your investment strategies. A finance professional can help you with this.

Achieving your financial goals takes time, effort and commitment. But by following the most appropriate strategies for your situation, you have a path that can lead you to success.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.
Edward Jones, SIPC member