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Goal Planning: It's Personal ... and Financial

March 20, 2017
Dreaming big: Financial goals, personal goals, SMART goals
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An old song says you can’t have love without marriage and vice versa.

There’s a corollary when it comes to investing: Personal goals and financial goals, like married couples, often go hand in hand.

In other words, if you know the "what, why, and when" of your savings, it becomes easier to formulate a financial plan that puts money away for that ultimate dream—whether it’s traveling the world, giving back to your community, or helping your children graduate from college debt-free.

So let’s think about putting your investing goals in two parts—one personal, the other financial—and planning for both.

Do Take It Personally

Many investors find that selecting tangible goals can actually help them reach their objectives. Knowing what your goals are can help you make better decisions and encourage you to be more vigilant about managing investments.

One person’s dream may be to buy a boat or other item of luxury. Another might dream of putting children through college or retiring by a certain age.

“Setting an investing goal is the first step in any client's financial journey,” said Keith Denerstein, director of guidance product management at TD Ameritrade. “Having concrete lifestyle goals, such as putting the children through college or retiring at a certain age, can help investors focus more closely on what they really want to achieve, and send them on the road toward their life milestones.”

Understanding your ultimate goal can also help you through whatever type of stormy weather the market might bring. Many believe one of the biggest mistakes a long-term investor can make is getting out of his or her investments when the market turns down. One of the keys to long-term investing is staying invested. Knowing why you’re investing can give you the fortitude to hang in there.

“Cash can provide security and peace of mind, but it ultimately won’t compound at a rate you need to cover future needs—things that a lot of millennials might not have on their minds now, such as the cost of their own children’s education,” said Patrick O’Hare, chief market analyst at

Programming Your Financial GPS

Once you know what you want to accomplish, you can plot a financial road map to help steer you there. That means coming up with the hard numbers, as in how much you need, when you need it, and whether the goal is attainable.

In other words, be SMART about your financial goals—make sure they are specific, measurable, attainable, relevant, and time-based. (SMART is an acronym usually used by Investools® to describe key criteria for the aforementioned actionable goals.)

Things to know when you set your financial goals include: (1) time horizon—meaning how much time you want to take to achieve your goal; (2) the amount of money you plan to start with; (3) the amount of money you’ll need to contribute each month; and (4) how these goals may fit in with the investors risk tolerance.

Working with a professional advisor who provides access to solutions such as products, tools, research, and guidance may help increase your confidence in meeting goals. An advisor can help you develop a plan that defines a strategy, timeline, and the solutions most likely to lead to reaching these objectives. But some investors prefer to plan these things themselves.

Having both a personal and financial goal can help you plot a path to the future, and can give you the motivation you need to sacrifice now to help make your ultimate dreams a bit more achievable.

The following video from Investools®, a TD Ameritrade education affiliate, takes a deeper look into the importance of both the personal elements (the "why") and the financial elements (the "how") of your investment plan. 

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