Achieving financial independence involves setting and fulfilling long-term personal and financial objectives. It’s crucial to identify your future financial needs and make it a priority to achieve them.
What Are Your Goals?
The initial step involves identifying your life and money priorities. Perhaps you dream of retiring and exploring the world, owning a home, or funding your children’s education. Establish what you want to do and rank your financial goals based on priority. Having this clarity helps you devise a more efficient plan.
Formulate a Plan
After determining what you wish to achieve, analyze each goal’s timeline and devise an actionable plan. For instance, purchasing a house may often precede funding your children’s college education, and retirement usually comes last. Evaluate your goals accordingly and allocate a time frame for each. For instance:
– Home Purchase: 2-3 years, requiring $15,000 for a down payment
– Financing the first child’s college education: 15 years, requires $20,000
– Financing the second child’s college education: 18 years, requires $20,000
– Retirement: 30 years, with a retirement fund goal of $800,000
You may also have other goals to consider. The key is to recognize the amount of time and money required to accomplish each goal.
The above estimates are based on assumptions that children will contribute to their educational expenses either through student loans, scholarships, or part-time jobs. Also, having a passive income source can reduce your retirement fund target considerably.
Develop an Investment Strategy
A strategic investment plan can help accelerate achieving your goals. Consider focusing on growth investing or building an income portfolio to facilitate meeting your objectives. Use tools like a compound interest calculator to determine how much to set aside at various stages to reach your targets.
Your investment plan should also align with your goals timeline. Undeniably, a home down payment fund may receive more allocation initially. As that goal is met, the focus can shift towards other long-term goals.
