If you set specific goals, you will assume that the savings you make are more natural and more likely to reach them. Saving money and being financially independent are goals that many people possess, but not all. This is partly due to the lack of clear vision. Setting specific goals to save money will help you achieve this goal faster and manage your assets.
For each goal, you can customise your own stock and bond portfolio. The usual goals that people choose are retirement, education, the safety net, an essential purchase (house, car, various) and general savings. Setting clear financial goals makes them more tangible and therefore achievable. This also leads to more precise management of your assets.
Here are five reasons why a targeted investment leads to more savings and financial success:
- Preventing insufficient savings.
If you do not have a specific goal, you tend to have an unclear expectation about how much money you have saved or can earn in the future. When you save money on particular goals, you know exactly how much you need to keep for your expenses or milestones. It will also help you stay on the road more easily.
A targeted investment helps you achieve optimal returns by balancing your asset allocation (how much you can save) with the time you spend to achieve that goal.
So it is wise to set up a savings plan and transferring money according to your schedule, and there are some companies such as VIABUY that make it easy to move money from your checking account to your savings account.
- Use time.
If you set a financial goal before you need it, you can do it more efficiently by giving the market more time to save money. For example, if you want to keep $50,000 and be five years old, you can put your money in an investment account and see how its money grows over time. Your monthly investment will also be significantly lower ($ 800 to $ 900 per month for a mutual fund with an annual return of 7%). However, if your goal was only a year, you will need to spend between $4,500 and $5,000 a month to reach your goal. Time-saving decisions can have a significant impact on your financial future.
- Achieve concrete goals.
For example, if you have a clear, data-driven goal, such as saving a certain amount when you buy your home, you can set milestones to achieve that goal. It’s no longer a guessing game, and it makes it easier for you to reach your goal. Psychologists call this “influence” on humans.
A 1998 study found that participants were more comfortable making, spending and saving stable income and knowledge of their wealth. They also showed greater self-control when they decided to save money, knowing the actual cost of achieving the goals, including immediate home expenses.
- Divide your goals into smaller, achievable steps.
Achieving a financial goal by dividing it into smaller parts is much easier for most people than doing it all at once. For example, investing $500 a month is more accessible than giving $10,000 in a lump sum to many young investors. By automating some of your savings, you can achieve your goals cost-effectively and consistently. Once you reach your first goal, you can convert the monthly savings to your next destination.
- Pass without fail.
By providing funds for your savings goals and meeting your core financial obligations each month, you can more easily balance your liabilities or stop accumulating additional debts. You can also spend the amount you spend on your savings to achieve a specific goal without being guilty and knowing that it matches the budget you have allocated.
With clear financial goals for monthly savings and contributions to these goals, you will reach them faster and develop healthy financial habits.