The Financial Education

Making Money Grow

Financial Goal

A financial goal is a specific amount of money that you want to save or invest. Your financial goals will help you reach your dreams, whether they are saving for retirement or buying a home. There may be other reasons why you’d like to set up a financial goal. For example: You might have an inheritance coming at the end of next year and would like to make sure it goes towards something that’s important to you such as paying off debt. Or perhaps you’re looking forward to having kids in the future and need to start making plans now so you can provide them with their own nest egg when they grow up. Whatever your reason, setting up a financial goal can really help you achieve more down the road.

How do I know if my current portfolio has enough funds to cover this new goal?

The answer depends on how much risk you take by investing outside of your employer’s plan or IRA. If you aren’t comfortable taking any risks then stick with what you already have. However, if you feel confident about your ability to handle some market volatility, here’s where things get interesting! The key thing to remember when choosing your investment strategy is that there is no one right way to invest – just different ways with varying amounts of potential reward/risk trade-offs. Choosing between these various options requires weighing your personal situation against your tolerance for risk. In general terms, the higher your tolerance for risk, the less conservatively invested your investments should be.

If you decide to increase your investment allocation, you’ll first need to identify which asset classes best suit your needs now and over time. Here are three areas worth considering: growth stocks, value stocks and bonds. Growth stock investors generally seek moderate returns while also accepting greater volatility than those who focus solely on “value.” Value investors typically shun high-volatility assets but accept lower returns compared to growth investors. Bond investors look for stable income streams without fluctuating price appreciation.

A good starting point is to review your existing holdings using the Interactive Brokers’ Portfolio Analyzer tool before deciding on an appropriate mix of asset classes. Once you’ve identified your preferred asset class allocations, it’s time to assess your total savings vs. your desired goal. Be mindful of inflation rates since many fixed dollar payments tend not to keep pace with rising prices. Also consider tax implications associated with withdrawing money early or rolling gains into later years.

Finally, determine how long you expect to live based upon age and health considerations. This information will allow you to calculate what percentage of your savings is required to support your lifestyle during each phase of life. Based upon your individual circumstances, you can adjust your target savings rate accordingly.

Once you’ve determined the specifics of your financial goal, it’s time to find out exactly how much cash you need to meet that objective. To accomplish this task, use our Savings Calculator.

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