In this post, we're going to look at the last few steps for moving from goals to actions.
Keep Investing Dead Simple
Tax wrappers have investments inside them, and investing is a function of risk and timescale. For Jane and Laura, as their FI date is 12 years hence, and as they’re likely to be investing for 50 more years after that, they need to ramp things up.
Assuming they can cope with the volatility of a 100% equity portfolio, that’s what they should aim for. If not, they need to go as high-risk as they can bear. The short terms goals are all less than five years out, so the money shouldn’t be invested at all, but kept safe in as high-interest account as the girls can find.
As they’re saving monthly, they should utilise monthly saving accounts to max the interest payable. If they had a medium-term goal like a holiday, which was seven years out, then they would invest more conservatively than they would to meet their FI goal.
As it’s moving towards a cash event, where they’d need the money to buy the holiday, they’d reduce the risk (equity exposure) as they got closer to the goal. The last two to three years of savings towards a holiday seven years away rather than two years away would go into cash.
Weight Savings Rates towards Shorter-Term Goals
As we’ve seen in the example in the last post, as Jane and Laura have some short-term goals over the next two to five years, and an FI goal of 12 years hence, they need to weight their savings to get the short-term goals ticked off first.
Determine just how important the shorter-term goals are to you and weight your savings accordingly. There is a clear psychological benefit in hitting the short-term goals – it’ll give you confidence that you can hit the longer-term ones too, including the big FI goal. So go for them with gusto, but don’t keep adding short-term goals which push the FI goal further away.
Maintain That Focus
You’re going to need to commit to focusing on the goals. Don’t let the drift make you miss out. Do whatever it takes, but two great ways are to keep your goals front and centre with a tracker, and to keep to a regular review schedule.