Smart Strategy to Fit Your Goals
The tricky thing about your finances is that there is no one-size-fits-all strategy. Different people have different needs for savings and different priorities, and that is OK. Rather than reacting to the latest web article or stock tip that your colleague gives you, a deliberate plan for short-term savings and long-term goals could increase your probability of success.
From Emergency Funds to Retirement
To quote Dave Ramsey, “Everything that can go wrong will go wrong. That’s Murphy’s Law, and he’ll move into your spare bedroom along with his three cousins — Broke, Desperate and Stupid… What we tell people is that you need an emergency fund because it’s Murphy repellent.” Having an emergency fund is often the first step in savings. You then can follow that up with directed savings for the things that are important to you. If it is important to pay for your child’s education, it makes sense to save for that. If family vacations are important, save for that. For the goals that are longer term in nature, investing in the market with a targeted risk budget could improve chances of reaching your goals. There are no hard and fast rules that guarantee success, only steps to increase the probability of you reaching your goals.
Inflation Makes This a Must
Imagine someone gave you a bucket with a small hole drilled in the bottom. They tell you that your goal is to fill and keep the bucket filled with water. Perhaps you fill it immediately and then sit tight or perhaps you slowly fill it over time. Either way, that water level will always slowly drop down. This is the effect that inflation has on the assets that you are working hard to save for retirement or other goals. While it may have little impact in the short term, inflation takes a big bite out of savings that are not growing. Because of that, having a plan for how your assets will grow is essential to having the purchasing power you need in retirement or for whatever goal you are pursuing.
Fail to Plan, Plan to Fail
If you ignore your savings and investments, the old adage rings true. Failing to plan often means that you are effectively planning to fail. Do a quick google search of bankrupt athletes or broke lottery winners. Time and time again, men and women who suddenly received great wealth, but did not have a plan, ended up losing it all. They did not intend to, but with no saving strategy and no risk plan, they ended up losing wealth that could have lasted them a lifetime. Talking to a professional could help you define you goals and successfully reach them. Why not plan for your success?