Working on your long-term financial goals is indeed a tough nut to crack. On the other hand, not having long-term goals is like going on a road trip without knowing where you’re heading. It’ll be like ending up at a destination where you probably don’t want to be.
Thus, keeping this in mind, this guide reflects upon how to invest in long-term goals and why it’s important to achieve financial goals.
Table of Contents
What are Long-Term Financial Goals?
Long-term financial goals are the ones you want to achieve, and they usually take several months or years. It could be anything, right from having your startup to investing in stocks, doing retirement planning, and more.
Long-term financial goals are all about efforts, proper planning, and having defined resources to achieve what you dream of after combining all your short and mid-term financial goals.
Long-term goals are a bit complex and need motivation and much-needed patience to succeed. Usually, these goals encompass massive life changes that create a crucial impact on your professional and personal life.
Why it’s important to set Long-Term Goals?
Often, long-term financial goals encompass different aspects of life, including personal growth, career, health, and relationships.
Setting long-term saving goals is important as they give you purpose and in a way the right direction on how to move forward with your actions and choices that are punctuated with several short-term financial goals.
11 Long-Term Financial Goals and How to Achieve it?
Emergency Fund
An emergency fund is the amount of money you set aside to cover any unexpected financial emergencies. Not only does this fund offer a safety net to your finances, but it also offers peace of mind. Thus, it becomes easier for people to deal with the tough phase without encountering any debt hassles.
Also, ensure instead of letting your emergency funds rest in a low-interest savings account, you can think of investing a part of it for long-term development. Moreover, you can do this via conservative investment means, such as bonds, index funds, or REITs (Real Estate Investment Trusts).
When you smartly invest your emergency funds, you may get higher returns. However, ensure maintaining a good balance between growth and accessibility as you must make sure that a section of your emergency funds is there in liquid assets which you can quickly access if any unforeseen situation occurs.
Retirement Plan
When you say goodbye to your job and enter the retirement phase, you want to save your dream amount of money in different accounts at that stage and do financial planning for retirement.
These long-term financial goals define how you would like to live; things such as where you want to live, what undone things you would like to finish, and a lot more post-retirement. Understanding that even your long-term investment goals will change with time and circumstances is essential.
Well, all you can do on your part is to make some smart savings. Aim to save at least 1x (times) of your monthly income by age 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67. These figures will help you plan your retirement and include the age you decide to retire alongside the lifestyle you wish to have during your retirement time.
Also, check out this blog – Understanding Different Retirement Accounts: 401(k) Vs IRA
Paying off your Debt
Within the period of six to twelve months, if you talk about the shorter time, the avalanche method focuses on your repayment commitments when you have high-interest debt. However, the snowball method first aims for your smallest debts.
If you’re having high-interest debt, including credit card debt, then consider paying it off under your short-term financial. Moreover, a debt snowball approach can help you pay off debt efficiently. Furthermore, you can focus on paying off your larger debts.
Child Education Fund
If you have children or are planning to start a family, the sooner you initiate saving for their education the better it is. This is where the 529 plan comes into the picture. It’s a tax-advantaged plan where the money you contribute to this savings account multiplies on a tax-deferred/tax-free basis.
Another benefit is that withdrawals from this account that are related to educational expenses are tax-free.
Become Financially Independent
Becoming financially independent implies that you save for your retirement in a way that your work becomes optional but not a necessity. Moreover, to achieve financial independence in your life, especially when you don’t want to become a burden on anyone in the future, you need to strategize.
Timeline plays a significant role in this case, as you should reach a particular state where you have multiple sources of income that would assist you in retirement. You can even consider side hustles (apps that make money from the comfort of your home). For example, Swagbucks, Survey Junkie, KashKick, InboxDollars, and a lot more money-making apps can help you save a lot and, thus, fades away your retirement worries.
Build Investment Portfolio
Are you working on long-term saving goals, such as retirement, which will take several years from now? In this case, you can think of quick and solid asset allocation. This implies that it allows you to invest more in riskier assets that have great potential for higher returns, like stocks, as in stocks, you don’t need to worry much about short-term market volatility.
For building an investment portfolio, it’s important to keep a few things in mind, and they’re as follows:
- Identify Your Financial Goals: For what reason are you saving money? Are you looking to buy a house or searching for ways to retire early? Or do you want to know how you can pay for your child’s education? And a lot more such goals.
- Analyze Your Risk Tolerance: With how much risk you’re comfortable managing your finances? You’ve to choose an asset that is suitable for your risk tolerance as people are more attracted to stock investment, while others invest more in bonds which is a safer alternative. So, decide wisely.
- Time Horizon is Important: Is there enough time to invest before you need money to meet your financial goals? For the short-term time horizon, conservative asset allocation is best, and for the long-term, aggressive asset allocation would be great.
- Choose Your Asset Allocation: A balanced asset allocation can help you make sure of how much risk you’re ready to take to seek financial growth.
- Choose Your Investment: After finding out your asset allocation, you should do in-depth research and decide which particular investments you want to include in your investment portfolio out of many.
- Regularly Update Your Portfolio: To keep your investment portfolio aligned with your long-term financial goals, you must regularly update it. This indicates that you should sell a few investments that have performed well. Additionally, you can invest more in other asset classes or add additional amounts to the account in the asset class below its target allocation.
Opt for Life Insurance
Life insurance helps you protect your better half and children from any unforeseen circumstances or dangerous events in case anything worse happens to you. It offers financial security, helps in paying living expenses, pays for medical emergencies, and pays off debts.
Moreover, life insurance stands right next to you whenever you’re in dire need of cash. In the life insurance policy, you can get a particular amount of money when you need it the most. And when you pass away, your family will immediately get your policy payout. And generally, this death benefit doesn’t come under federal income taxes. For instance, a $500,000 policy offers $500,000 in death benefits that will directly go to your beneficiary.
Debt-Free Living
Do you wish to have a debt-free life? Well, everyone does! When you don’t need to own anything, it offers you a sense of freedom and satisfaction.
People living debt-free lives have more alternatives on how, when, and where they can invest their money as they have better control over the money they own.
To live a debt-free life, you must focus on the following things:
- Should know how much debt amount you need to pay off
- Choose your go-to debt paydown strategy that includes debt snowball, debt avalanche, debt consolidation, and debt counseling.
- Make a budget plan with various budgeting apps like Mint and cut off unnecessary spending.
- Once you’ve a debt-free living, make sure you stick to your plan and never go off track.
In all, turn your dreams into reality by becoming debt-free.
Real Estate Investment
Drafting your wishes or financial goals can take a lot of changes that you might haven’t expected. Thus, it’s significant to re-evaluate what assets you hold at present which will ultimately help in managing your estate a lot easier.
In this way, you can have a friendly discussion with your family regarding your financial desires and your current financial landscape. Ensure avoiding unforeseen situations after your death, as there shouldn’t be any worry left behind for your dear ones from your side.
Also, read: Basics of Investing in Real Estate
Pay Off Mortgages
While you’re still having a full-time job, paying off your mortgage becomes an important long-term financial goal. It can help you make a big pile of money into your retirement portfolio.
Now, when you’re in search of true financial independence, giving a send-off to your debt can free up money that you could otherwise save or use to enhance your current lifestyle and be better prepared for achieving long-term goals.
In a few situations, it’s better to hold onto your mortgages and make regular payments as per the schedule. However, paying your loan and removing your mortgage early can help you give a boost to discover other financial alternatives.
Cut off Your Expenses
Enforcing cost-effective measures in your life before retirement hits you gives your lifestyle and financial path the right direction or perspective.
Therefore, budgeting and savings help keep you on the right track when you’re trying to meet your long-term financial goals.
It doesn’t matter where your finances stand in recent times, it’s always beneficial to prepare yourself for important events in your life ahead by reducing expenses that are unnecessary or hold negligible importance such as owning multiple vacation properties or vehicles, etc.
Also, ensure that you receive your spending history and consider alternatives, such as preparing meals at home rather than spending money on an expensive dine-out. Use more coupons and discounts when grocery shopping to maximize your savings. Moreover, buy generic products instead of hooking for branded ones to cut costs but without compromising quality.
Last but Not Least
Whatever your financial goals, saving includes making a blueprint and sticking to it. Having short-term, mid-term, or long-term financial goals and their planning can be a daunting task but it’ll help you understand how to secure your future.
Whether it’s about paying off a mortgage, making a real estate investment, saving for a child education fund, building an investment portfolio, building an emergency fund, or more, a financial advisor can offer you valuable insights into which type of long-term financial goals will do wonders for you.
