(Originally published on my frugal blog on June 1 2009)
“Why do I save money? Why do I invest? It’s hard work!”
“Sometimes it is so hard that I just feel like giving up. Why do I have to ‘suffer’ today and live without the things I want?”
“Why do I have to ‘sacrifice’ so many things when others seem to be enjoying life?”
“Am I doing the right thing?”
Do you ever find yourself feeling the same way, or asking the same questions?
You’re not alone!
The simple answer is, we invest and save to achieve our financial goals!
Now let me ask you, what are your financial goals? Do you even have goals?
Before you even spend a single cent in investments, you must determine what your financial goals are.
A financial goal or a target is simply this. Who and where are you going to be in the future?
Now, many people go on with life without really planning or setting financial goals. If you ask them what their financial goals are, you will probably get these answers:
- I want to be a millionaire
- I want to own a house and two cars
- I want to retire by the age of 45
- I want financial freedom
- I want to send my children overseas for their education
What’s wrong with these goals? These are in fact noble and well-intentioned goals.
But these goals are not specific enough!
Imagine if you wanted to start a business, and needed investors to provide some start up capital. When they asked you for a business plan, you reply with:
- The business will make millions
- The business will expand to two outlets
- You will get your money back with a lot of profits
Do you think anyone will invest? No, for the simple reason that you are not specific enough.
How many millions are you talking about? 1 million or 10 million? When will the business expand to two outlets? In 2 years or 20 years? How much profits are you talking about? And what’s the ROE?
Goals and Investment
So what has setting goals got to do with investment? Everything!
(I seem to be using the exclamation mark a lot today!)
You can only invest effectively and wisely once you know what your financial goals are.
Let me use another analogy. If you wanted to go to your neighbour’s house, you will probably walk. If you wanted to go to the city you would drive or take public transportation. If you wanted to go to Hawaii, you would have to fly there.
But if you didn’t know where you wanted to go, how would you know which form of transport to take? Will you choose the most popular, follow what the rich people are using or pick the one that is hot on the news and media?
Different investment vehicles have pros and cons, and which one you use will depend on your specific financial goals.
This is why there can never be one investment that suits everyone.
Taking Goals Seriously
Another aspect about the financial goals is how much priority you give to achieving your goals.
If we don’t take our goals seriously, then we will NEVER achieve them.
How many New Year’s resolutions are broken because there was very low commitment or lack of motivation?
To really achieve your financial goals, you have to first set goals that can motivate you. Make sure these goals are constantly on your mind. Every financial decision you make should reflect these goals.
After you have set your financial goals, THEN you can start to plan HOW you are going to achieve that goal.
This is where financial planning comes into play.
I will talk more about setting goals in my next post, and more about financial planning in subsequent posts.
Today I’m going to introduce a new feature called the doggy bag. Doggy bags are used at restaurants when we can’t eat and digest all the food at once. We take the food home in a ‘doggy bag’.
In today’s post, I will leave you with something to take away.
Think about your financial goals. If you have not seriously put some thought into it, spend some time really thinking or discussing with your spouse.
If you already have financial goals, think about the last time you actually took the goals seriously.
[tags]Financial Goals, Saving, Investing[/tags]
Photo By: Svilen Mushkatov