Rainy Day Investing 101 – Define Your Goals
Well, it’s about time for me throw together a new post series for Rainy Day Saving. Since I’m planning on investing in various means, I figured I’d share you my journey and the information that I have found to be helpful for me.
So to begin, I want you to know a little about me. I am a conservative type of person when it comes to money, as I always try to have a mental line that I refuse to cross when it comes to my bank account balance. I know that when I get close to crossing that line, I am either a) spending too much or b) things are not financially going well with my job/life that is causing problems and threatening to break the bank.
Next, I have both short term and long term goals. I’ll define these in a little bit, as this is the main key to this post today, but I feel that this is perhaps the biggest thing that one needs to do to begin your investing future. If you do not know what you want to get out of your money, then you’ll never be able to find the necessary track(s) that is right for you. So, as I believe that the first step in having a smart investment plan is knowing exactly for what you’re saving. Again, my goals may not be exact to yours, in fact, I guarantee it, but you never know. You might also be in a different stage of goals than where I am. For example, one of my major goals right now is to pay off my car loan and my student loans within the next five years. You might already be finished with paying off your student loan debt, or never had it in the first place, OR you may one of those who are needing a longer period of time to pay that nasty student loan off because you already have a family to care for, or a new spouse/child.
Some common goals:
- buying a new car
- putting a down payment on a home
- paying off one’s student loan debt
- saving for a child’s college education
- ensuring a comfortable retirement
Now all of these have a investment time horizon. That means, they all have a time-clock on them. A new car will probably be a short-term goal, whereas retirement may be a long-term goal for you. To be a little more specific:
Short term goals: Expenses that may occur in less than 2 years.
Intermediate-term goals: Financial objectives that are roughly 3-10 years away.
Long-term goals: Goals with the longest time frame – 11 years or more.
Alright, now that we’ve got that out of the picture, here’s a little homework for you. I know, I know, I really have say over what you do, but I guess it’s the teacher in me (I have a couple of degrees and a license to prove it). Now, I want you to make a list of your goals. This includes all three categories. Where do you want to see yourself financially in 5 years? 10? 20? Are there any big investments that you want to make sure you do in the next few years: get married? buy a car? a house? Think about it. Write it down. This is the first step for your financial future. If you have a spouse/fiance/significant other, bring them into the conversation. It might get a little heavy, yes.. money is never a pleasant topic, but it does need to be tackled. The more efficiently you do so now, by making these goals, the better off you will be.
So in case you need some inspiration (and for my own benefit), here are my own goals (with a little bit of my guy’s help).
- pay off my car loan
- pay off my credit cards
- have 1/4-1/3 of my student loans paid off
- get married
- have 20% (or more) ready for a down payment on a house
- become a landlord
- (possibly) go to graduate school
- have children
- be able to take family vacations
- be able to financially help my mother (so that she can quit/retire her job and live comfortably).
- retire with a secure cushion
Obviously, since I’m only 25 my long term goals are um… lacking at the moment. However, I think that all of those are decent enough to be honest. I hope that I can accomplish them in my lifetime, as they all seem doable. What about you? Have you done your “homework” yet?
Count those Raindrops!