Let’s think that you have already defined your goals for a moment, but when looking at your progress, you are far behind.
The following are steps to take when your goals seem unattainable.
Don’t worry; there are always steps you can take to get back on the right track. It is less complicated than you think if you use correct financial planning.
1. Establish your short, medium, and long term goals:
Define what is important to you, what you want to achieve, how you want to live, etc.
Based on those answers, define the amount you need to meet them. You can organize your goals by relevance and by time.
You must have a clear work plan on which you can follow up. With constant savings and the correct investment instruments, you can benefit from compound interest and watch your money multiply over the years.
2. Clear goals according to your objectives:
If you already have clear goals and know where you want to go, you can do periodic reviews that allow you to see if the amount of money you are allocating to your goals is enough.
But what if you realize that it is not enough?
The best thing, in that case, is to have a Financial Planner or Financial Coach by your side who understands what is important to you, helps you generate a plan, and can be monitor if you are on the right path. This person could make adjustments so that you arrive more quickly to the necessary amount.
3. Time is your ally:
Long-term goals usually require a more significant amount of money, such as buying a home, saving for a child’s education, or retirement. Time is our ally in the case of long-term investments.
4. Market news and its volatility:
Even if you are surrounded by market news and stock volatility, having a negative performing year or period should not be your primary concern. Historically, long-term markets have given positive returns. The longer your money is in the market, these variations will not negatively impact that what takes you away from your objectives.
Image: In this graph, we assume that everyone has an investment with an annual yield of 6%, except Luis, who invests at 2%. Source: Own elaboration based on the graph “Benefit of saving and investing early,” Guide to Retirement 2019 edition, JP Morgan.
Saving early, saving consistently, and correctly investing money are some of the keys to a successful retirement
There is a misconception that you have to find the best investment, the best company, the next Google for proper financial planning. We do not say that it is impossible, but it is not advisable to trust your future to variables that do not depend on you.
It is much more convenient to focus on what you can control through a personal budget: such as your time horizon, your income, the optimization of your assets, your expenses, and your savings.
What can you do to modify your plan so that you can achieve your goals?
– Increase your time horizon:
Many times extending your goals can make a big difference. It means more time to save or, for example, in retirement, the difference of retiring at 60 or 65 years can represent up to an additional 16% of financial assets, which positively change the level of spending or income.
– Reduce the amount of the goal:
If current data shows that your goal seems out of reach, trying to meet it with something that requires a lower amount may be a solution. Rethink your budget so that you can meet your goals, modifying the amount needed without abandoning your dream.
Looking for a slightly cheaper home than you dreamed of can make you feel fulfilled and happy.
– Increase the exposure of your equity investments:
Investments in the equity market (stocks) have a higher level of risk and volatility than other types of assets such as bonds. Still, they also give you the possibility of achieving very high returns. Being aware of your plan, your personal characteristics, and the operation of these assets, you can invest a part of your assets in stocks.
This recommendation only applies if you still have a long time to reach your goals and have an investor profile that allows you to be willing to live periods of negative returns without panicking and exiting that investment early.
Once you have that plan, remember that the follow-up you will give, and its flexibility are just as necessary. A correct program will provide you with the peace of mind and certainty of arriving well prepared for your future.