Have you taken a good look at your financial goals recently? Being over one year into an unprecedented pandemic has most likely changed the course of your finances. Coming off the 2020 tax season is a great time to reevaluate your goals and check in on how your investments are helping you move towards the financial future you desire.

The following 5 steps will help you align your investments with your financial goals and facilitate greater success achieving them:

1. Clarify Your Financial Goals

Creating financial goals for yourself is important and is a good way to clarify what you want to achieve. First, take a look at your goals from last year and reflect on your progress. Then, write down all of your ideas for this year including items that carry over from last year. Don’t worry if you didn’t specify any goals last year, you can start fresh with a brand new list now. Once you have a list in place, go back over each item and apply the SMART principles to each goal –  Specific, Measurable, Attainable, Relevant and Timely. When you’re done you should have a solid list of your financial goals.

2. Give Your Financial Goals Timelines

After you’ve determined what your revised financial goals are, you can divide them into categories based on their timelines. You should have a variety of short-term (1-2 years), mid-term (3-10 years) and long-term (10 + years) goals. The timeline of your goals will ultimately decide what type of investments you consider for that goal, which we’ll dive into more in step 5.

3. Determine Your Risk Tolerance

Investments come with a certain level of risk, so it’s best to first determine what amount of risk you’re willing to take with your finances before choosing which assets to invest in. The markets will rise and the markets will fall – that is inevitable, so you have to determine where you’re willing to take a bigger risk with the potential for a large reward, and where you aren’t willing to do so. Overall, putting your funds in a variety of assets with different risk levels is a good idea.

4. Have an Emergency Fund

Make sure to have an emergency fund available in case of unforeseen circumstances. Through the COVID-19 pandemic, we have all realized that you need to be prepared for the unexpected, especially financially. So take stock of your necessary expenses and set aside a fund in case of emergency. 

5. Look Into Which Investments Are Suited to Each Financial Goal

Now that you have the basis of your financial goals formed, it’s time to match them to the investments that align with those goals.

Here’s a look at some examples of investments that generally align with each type of goal:

Savings AccountsXXX
(low to no risk)
Exchange Traded Funds (ETFs)X
(maturities under 2 yrs)
(maturities between 3 and 10 yrs)
(maturities over 10 years)
(depending on ETF type)
(depending on ETF type)
(depending on ETF type)
Long-term Savings AccountsXX
Money Market FundsXX
Individual Common StocksXXX
Stock Mutual FundsXXX
Real Estate FundsXX
Hard Asset FundsXX

This chart is in no way exhaustive, but it should give you a good idea of the types of investments that would align with each of your financial goals based on their timeline and risk level.

Finally, don’t forget to check back and re-evaluate your goals frequently. Taking a look at your financial goals yearly is a good way to confirm that you’re on track to achieving them and, if not, it gives you the opportunity to make some adjustments.

Investing can be a daunting process and one that takes a great level of expertise to navigate. At The RaeLipskie Partnership we’re always here to help with your financial goals and investments. Don’t hesitate to reach out to one of our Portfolio Managers for further guidance. Let’s keep those financial goals and investments in line with one another!