Building Greater Wealth With Goal-Based Investing

Regardless of your motivation to achieve financial freedom, maintaining a high savings rate is a commitment to a challenge. Setting aside 50% or more of our earnings doesn’t come naturally to most of us; and it’s particularly tough to do with modest incomes. Even with proven money saving hacks, frugal living and micromanaging spending can quickly lead to budget burnout.

Since being over-stressed is exactly the feeling we are trying to escape, personal accounting should ease the road to success in achieving financial goals in life.

<<AGAINST CONVENTIONAL WISDOM>>

The truth is that happy retirement is a fairytale too many of us believe in. Our stories involve (over)investing our time to make enough money for today and fund a big retirement goal that lacks perspective. But, retirement as an end is the antagonist.

Aiming for one long-term financial goal (with a constantly moving savings target) often comes to a conclusion that bears regret over missed opportunities and exhaustion from years lacking work-life balance. Rather than defer enjoyment and earnings for a far-off job-free utopia, mini-retirements are a better way to savor the present while still progressing toward total financial freedom and full(er) retirement in the future.

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Although you might not read about it in traditional literature, there is a better way to invest in retirement solutions by answering five key questions that get to the real story: what, where, when, how much and, last but not least, why.

<<METHODS TO THE MADNESS>>

Goal-based investing is an approach that can help you do what you really want by making it more practical to account for the dollars to do it. Partitioning your portfolio around designated outcomes based on lifestyle design creates straightforward money management guidelines that balance short-term milestones with long-term growth.

The template is a snap to follow: formulate your goals, articulate your motivation for achieving them, and assign a time period and quantifiable budget for each. Adding these simple steps to your retirement planning routine can clarify where, when and how much money goes toward your short, mid- and long-term whys.

Adding these simple steps to your retirement planning routine delivers (at least) three very valuable benefits:

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(3) Optimal Cash Management

Clear targets for saving, investing and withdrawals makes it easy to set-up automated systems for effortless cash flow management.

(2) Greater Sticktoitiveness

When assets are allocated to specific goals with specific time horizons, you can stick to the schedule without even contemplating making a(n irrational) change because the markets aren’t performing as you expect in the moment.

(1) More Rewarding Results

Many psychological studies have tested goal-setting theory and show that we are more motivated by relevant activities rather than abstract numbers. In the case of financial goals, that means that syncing savings with personal aspirations help us follow-through on what we set out to do.

THE ROAD TO SUCCESS

Financial goal-setting does not have to be an agonizing road trip (that we end up avoiding). Cancel out market benchmarks and keeping up with the joneses as measures of success and solve (instead) for how well your portfolio tracks against your personal goals, and enjoy financial planning that makes you richer in life.

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Redefining retirement from a single destination to balanced breaks from work can be a critical turning point to aligning passions and personal ideals with ideal wealth-building. Goal-based investing puts us in the driver’s seat to control where our money and our time go; it smooths the road to success by supporting meaningful mini-retirements while adding greater purpose to spending and saving more today (and beyond).

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