“From Dreams to Dollars: How to Set Effective Money Goals”
Written by R. A. Stewart
Having a goal for your money is a must if you want to get ahead otherwise you will just simply fritter away your money on useless stuff which does not add value to your life.
Your money fits three descriptions; they are:
Short-term money (12 months or less)
Medium-term money (1-5 years)
Long-term money (6 years+)
Short term money is money you need for the short term. This is money used for emergencies, dental costs, and every day expenses. It is a good idea to keep a separate account for emergencies. An investment in conservative managed funds if you have easy access to the money when you need it. A separate savings account for this is suitable.
Medium-term money is money needed within 5 years. This could be savings for a car or an overseas holiday.
Long-term money is money needed in the long-term. This is money for your retirement or savings for a mortgage.
Where should you invest your money?
Short-term money is best invested in an ordinary savings account where your money is on call, however, an emergency fund could be invested in a conservative managed fund providing you have easy access to your money if and when you need it.
Medium-term money is best invested in a balanced managed fund.
Long-term money is best invested in growth funds.
There is no hard and fast rule as to where you should invest your money; it all depends on your risk profile and whether you have the mental fortitude to ride out the lows of the share market.
The benefits of being a saver and an investor cannot be underestimated. A saver will live within their means and wait until they have saved enough money before making a car purchase.
A spender will have nothing to show for their labours and borrows money for things they need. There is a cost to this and that is interest which means that the spender pays more for stuff they have bought with borrowed money.
Discretionary spending money is a different category of money. It is money which you are free to spend on anything you like. Some investors like to use this to increase their financial portfolio or even to try out some speculative investments such as Bitcoin and other cryptocurrency.
People who have any kind of debt do not have any discretionary spending money until that debt is paid. Paying off debts is the responsible thing to do.
It is imperative that you manage your money with the future in mind because situations will arise when you will need a large amount of money for things which your next paycheck on its own won’t cover. Ask yourself this question, “What can I do today that my future self will thank me for?”
It is also important to continually gain financial literacy by reading books about financial management and wealth creation, but the best way to gain financial literacy is by investing in the share market. There are several share market investing platforms on the internet which enable ordinary people to drip feed money into the share market or in managed (mutual) funds.
Don’t be afraid of making mistakes because as the saying goes, “He who never made a mistake never made anything.” Mistakes are just part of the learning process.
About this article
The opinions expressed in this article are of the writer’s own opinion and may not be applicable to your personal circumstances, therefore discretion is advised.
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Read my other articles on www.robertastewart.com
