What does success look like? 3 Questions to Answer when Choosing Your Investing Goals

By Andy Hayes

If you’ve ever sat down with a financial planner or taken a class about investing, one of the first things you were probably asked was: what are your goals?

While understanding the stock market can be a challenge, knowing what your own goals are can be an even bigger challenge.  Unfortunately, they’re your goals – we can’t pick for you.  But we can give you some direction; if you are able to answer these 3 questions, you’ll be well on your way to starting to frame how you look at investing goals.

1.    Can you afford to lose (almost) all of the money you are investing, at least temporarily?

Do you need access to any of your retirement funds prior to your retirement?  This should be one of your primary considerations; a good way to look at it is to just think of the money you put into stocks as possibly gone until you retire – with the assumption you’ll get a much larger sum back, of course.  What this question is trying to help you avoid is making high risk investments when there is a high potential for you to need to pull money out of those investments.

If you have financial considerations in the near-term – like buying a house, having a child, etc. – consider dividing your investment dollars into stocks and then other arrangements that are more liquid, such as bonds and CDs, or looking at stocks in our application that have a higher safety score.

2.    At what age do you think you’d like to retire?

One of the hardest questions that you’ll always get asked by a financial adviser is what age you want to retire.  It can be almost impossible to think about if you aren’t in a career that has a set retirement age (and those jobs are becoming obsolete anyway).  We think it is a good idea to at least take a guess – for example, if you’re in a high paying career and think you’ll want to take a break early, maybe your 50s is a good choice for you; if you love working and think you’ll want to keep working for while, maybe 70 is a better goal for you.

Just because you set a goal of retiring at “X” doesn’t mean you have to retire at that age – you can always adjust the date as you go.  But putting a date on the calendar at least gives you some focus towards how much you are putting into your investments.

3.    What kind of lifestyle do you want in retirement?

Last, but not least, is another question favored by financial advisors and loathed by individual investors:  what do you want your life to be like when you retire?

A great exercise to help you understand this is to pull up your accounting or budging software (if you aren’t using one, we strongly recommend doing so – Mint is great); print out a copy of your expenses for the last month, and then revise the numbers based on what your retirement would look like.

Would you eat out more often? Or less?

Would you no longer have a mortgage payment, or would you sell and more into an apartment?  A beach cottage?

More travel or less?

Don’t forget, you’ll want a bit of extra for medical expenses.

These questions are hard, and sometimes incredibly difficult if you’re having trouble just deciding what to have for lunch.  But, they’re worth thinking about as only you can decide what you want in your future!   And you can always change your mind as you learn more about yourself, about, investing and about the stock market.

What are your big questions about retirement?  Come join the conversation over on our Facebook page.

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