Many investors have a number of independent financial goals but no real formal plan to achieve them. This problem is compounded when goals (such as retirement savings, third level college fees, weddings, travel or paying off loans) overlap or even conflict. For example, investors may have a vision for their lives in retirement and may think a pension they started in their 20s or 30s will get them there, but don’t understand how other goals can divert their journey.
Financial Planners use goals-based planning to help clients prioritise goals and find the best way to reach them. Rather than simply investing for its own sake, goals-based investing gives you something concrete and meaningful to strive for. It helps you connect investments to what really matters; family, future experiences and personal needs.
Goals-based planning can help you think about not only risk tolerance but also “risk capacity”—the amount of risk you should take to best meet your goals.