“I want that!”
“No, you can’t afford it.”
“I want that!”
“No, you can’t afford it.”
How many times have you heard these words? Now how many times have you had this conversation with yourself? Just like the Beatles song goes, “You can’t always get what you want,” definitely plays true when you are dealing with financial goals. Savings money is tough work. It takes a lot of dedication. And you have to actually stick with it.
Saving money is a lot like working out. You can go to the gym and just start lifting weights day after day and hope you get the results you want in the time allocated. Or you can sit down, draw out a game plan, follow it and track your progress. Now which plan do you think is more likely to be successful? Saving money is not much different. It doesn’t really matter which financial goals you’re trying to achieve, having a financial plan may help increase the odds of your success.
Saving for shorter term goals like a new car or vacation tend to be simpler because saving $2,000 will most likely result in actually setting aside $2,000 over the course of a few months or a year. That’s because you are most likely going to invest in shorter term securities like 3-6 month CD’s and money market accounts. On the other hand, saving for long-term goals such as retirement requires a more complex allocation of funds. The asset allocation mix, target rate of return and tax status play a much larger role in affecting your ability to reach these goals.
It’s about learning and understanding what exactly you need to do to achieve your goals early on that has the potential to significantly increase your likelihood of successful financial planning. The elephant in the room isn’t the target rate of return, which most often may feel like it’s more out of your control than within. Instead, do a little more research on risk and your risk tolerance. You’ll help yourself manage the emotional roller coaster that often comes with investing. After all, knowledge is power and will help you to better understand your savings strategy. Next you should focus on your ability to save and into which tax advantage accounts like 401ks and IRAs will be most effective in your situation.
Saving and investing is not the quick fix to your financial woes. It’s a strategy that when applied appropriately can often prove rewarding over the long haul. There are certainly no guarantees when investing in the stock market or various other securities. Speak with a financial professional to help ensure that your saving and investing strategy is right for you.
