Getting Started : Setting your
Every trip needs a destination. Every marketing
plan needs an objective. Similarly, every investment plan needs a Goal.
What are you saving for? Is it for retirement? A
trip to Europe with the family? A down payment on a house? Your child's education?
Or maybe a second home?
There are many different goals that you want to
achieve. However, due to physical limits and time constraints, some kind of
choice must be made regarding which goals to pursue. You have to Prioritize.
Prioritizing simply means deciding which of your
goals are the most important. Financial goals -- more often than not-- collide
with one another. Paying for the family trip to Europe may take away money that
can otherwise be used as down payment for a new car. The principle is this :
You should work towards the lesser goals only
after the really important ones are well provided for.
After you have prioritized your goals and know which
ones you should be working towards first, assign a dollar value to these goals.
For example, a trip to Europe for the whole family would require at least $10,000.
Or, a new car would require a down payment of about $20,000.
Be as accurate as possible with these estimations.
Some of you might get scared by the large sums of money that some of your goals
require. DO NOT WORRY. All it takes is a little planning. If you've planned
for it, your chances of earning the money by the time you need it improves dramatically.
TIME is the most important ally when it comes to
setting your goals. With time on your side, any investment goal can be reached
by virtue of the power of compounding -- which is basically small
amounts of money, properly invested over long periods of time, growing into
very significant sums.
Lets take a very simple example to show the power
of compounding. If you save $20 every month in an investment that gives you
a 15% return, in 30 years time, your savings would be worth $141,947.20! (try
out our Savings Calculator)
The point is that to put time on your side, you
need to decide early which of the many possible financial goals are really worth
pursuing -- and start working toward them.
The goals you set would give you a rough idea of
how much money you'll need. Then you can start to think about which unit trusts
might be right for you and what kind of returns you can reasonably expect.
You should plan your
finances and spending around these goals. Each time you spend money on a purchase
or investment that doesn't help you reach one of your main goals, ask yourself
whether the spending is really necessary.
Next : Being disciplined