You may have heard the term ‘Goals Based Investing’ before but not really been sure what it means. Here I will try to explain the concept and how it can be of benefit to you.
Goals based investing basically means deciding on a future financial goal and then setting up a plan to reach that goal. It could be short, medium or long term. An example of each might be:
Short Term: You are planning an overseas holiday in 12 months and it going to cost you $X amount of money, including the spending money you would like to take with you. How much do you need to start saving now to achieve that goal?
Medium Term: You plan to spend $40,000 on a new car in 3 years. What do you need to start doing now to ensure the money will be available when you are ready to purchase the new car.
Longer Term: You really would like to retire from the workforce at age 60 and in retirement you will need at least $1,000 a week for cost of living. You also want access to money for things like holidays or home improvements. So what plans need to be out in place now to help you reach that goal.
These are just some example of what the different goals might look like. But of course there will be many others.
Goals based investing looks at your various goals and then tailors plans and strategies to help you meet them. Shorter term goals will typically rely on a savings strategy that sees you put money aside each week, fortnight, or month and establishing a place for that money to wait until it is needed.
Longer term goals such as retirement planning will encompass things like superannuation and longer term wealth creation strategies to ensure that you are close to having the lifestyle of choice when you want it.
People will typically have a range of different goals and timeframes and the job of the financial planner is to sit down and help you sort them out and to prioritise them, and then to develop strategies and share ideas on how best to achieve those goals.
Like may things worthwhile getting started does take a bit of motivation and willingness to sit down and evaluate your current circumstances and actually work out some financial goals. But again like anything worthwhile once you make that effort and commit yourself to the process the rewards can be outstanding. Knowing what you want and how you are going to get there can be very empowering. There is also the sense of satisfaction of seeing that you are on track to reach your goals, or to be able to see where goals and plans might need to be adjusted due to changing circumstances.
Unfortunately life can get in the way of doing this sometime.
The starting point of Goals Based Investing is in understanding your current financial circumstances, including personal cash flow and then to work through what you want to achieve and enjoy in life over the next few years. From there it is case of working out what needs to go where to give you the best possible chance of reaching your goal.
Please do not hesitate to contact me if you would like to know more, or if you are ready for this process.