Setting goals is critical to your financial wellbeing, and it starts with introspection and questions. For example, would you love to work into old age or do you want to retire early? Would you like to start a second career or own a business? How will you financially provide for your children’s college education? Is your dream house a near or distant possibility?

At the heart of having an investment plan for your future is figuring out exactly what you want to achieve. In determining your investment goals, there are several questions that can help you and your financial advisor develop an appropriate investment plan.

  • First, how long can you invest your money?
  • Second, how comfortable are you with up and down movements in the value of your investments?
  • Third, how much ready cash do you need to meet unexpected emergencies or expenses?

Once you’ve answered those questions, you and your financial advisor can begin to weigh the three primary investment goals – growth, income, and stability or protection of principal – to determine how to select specific investments that are appropriate for your investment plan.

Move saving up your priority list

Typically when we budget, we budget all of the required obligations that we have — mortgages, car loans, utilities — and then we budget our discretionary spending. And whatever is left over, if anything, is what we save. Re-order your list (and priorities): Pay required household bills and then budget your savings, moving nonessentials to the bottom of the list.

Smart planning starts with a simple principle: Pay yourself first

Save systematically to take advantage of the potential for compound growth. As a hypothetical example, Sally, age 23, invests $5,500 a year for 10 years in a Traditional IRA. At age 65, her investment will be worth $363,418, based on a hypothetical, consistent return of 5%. By contrast, David starts funding his Traditional IRA at age 40, putting in a total of $143,000 over 26 years until he’s 65. Using that same assumed return, his investment will be worth $295,180 — about $68,000 less than Sally has in her account even though she invested $88,000 less.

A small amount can be huge here, even if you are saving $10 a week or $50 a month or $200 a month. Doing so may be more reliable than hoping for an inheritance from your parents, who may incur unexpected medical bills or give their money to someone else.


This article was written for Wells Fargo Advisors and provided courtesy of Mitzie Wilson, Financial Advisor in Phoenix at 602-404-5062

Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE

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