Goals-based saving and investing strategy

Staying focused and disciplined, even when markets are volatile

It’s crucial to remember that saving and investing is not just about making money. It’s about making your money work for you to help you achieve your financial goals. Therefore, it’s important to have a clear understanding of what those goals are before you start investing.

A well-defined goals-based saving and investing can help you stay focused and disciplined, even when markets are volatile. It can also help you make better saving and investment decisions and stay motivated throughout your wealth creation journey.

A goals-based strategy can help you make wise financial decisions and achieve your desired outcomes. The key lies in setting realistic and achievable goals that align with your personal and financial circumstances.

Specific goals
First, your goals need to be specific. It’s not enough to say, “I want to save more money.” Instead, you need to define what you’re saving for, how much you need to save, and when you need the money. For example, “I want to save £200,000 for a deposit on a house in five years.” This specificity provides a clear direction and helps avoid procrastination.

Alternatively, to generate a specific income to maintain your current lifestyle in retirement, you may say, “I aim to generate an annual income of £80,000 after tax. This will be sourced from my private pension, state pension and any residual income from my investment portfolio. I plan to start drawing down on these funds at age 58, which gives me 15 years to continue growing my investments and savings. To achieve this, I will consistently invest in a diversified portfolio with a balance of equities and bonds, focusing on long-term growth and income generation.”

Measurable goals
Next, your goals need to be measurable. This means setting specific targets and deadlines that can be easily tracked and assessed. For example, if you aim to save £200,000 in five years or generate an annual income of £80,000 after tax for your retirement, you can break this down into smaller, more manageable monthly monetary targets. You can track your progress and make necessary adjustments by making measurable goals.

Attainable goals
Your goals also need to be attainable. While it’s good to aim high, setting unrealistic goals can lead to frustration and disappointment. Therefore, consider your income, expenses, and other financial obligations when setting your goals. Start with smaller, more achievable goals and gradually work your way up as your financial situation improves.

Relevant goals
Furthermore, your goals should be relevant to your overall life plan. If, for example, you’re planning to start a family, your financial goals will likely include saving for a larger home, starting school fees or university funds, or increasing your protection coverage. By aligning your financial goals with your personal goals, you can ensure that your money works towards the things that matter most to you.

Time-bound goals
Finally, your goals should be time-bound. Setting a specific timeline for achieving your goals can create a sense of urgency and motivate you to take action. Whether saving for a holiday next summer or planning for retirement in 20 years, having a defined timeline can help keep you on track.

Not a one-time activity
Setting financial goals is not a one-time activity. It’s an ongoing process requiring regular reviews and adjustments as your circumstances and market conditions change. So, think about what you really want to achieve with your investments. Set clear, realistic and measurable goals. And then develop a saving and investment strategy that aligns with these goals. This will put you on the path to successful investing.

Remember, the journey of a thousand miles begins with a single step. So, take that first step today by setting your financial goals and starting to achieve them. You’ll be glad you did.