Defining objectives for your financial journey
Ok then, now that you learnt how to budget, and before you learn how to save money, let us take a look inside objectives definition. I looked at the Cambridge Dictionary definition and it is quite simple: “something that you plan to do or achieve”. I would remove the word do and emphasize on achieve, because inside there is a notion of finishing a task that required a lot of work or effort (again, from Cambridge Dictionary).
Applied to our topic, an objective could be two things: first, a quantitative one — “I want to save 50k$ over the next 10 years”; second, a qualitative one — “I want to finance benevolent organizations working to clean our seas because it is important to me”. Obviously, the problem with the first statement is you lack a reason why: why do you want to save that much money ? An objective without a motive is likely to be given upon rather quickly. Do not do that. Saying that does not mean the second statement is the correct one. Yes, there is a motivation but how much are you going to finance on what frequency? Giving 100$ every 2 years will not make any difference, are you sure it translates your love for the seas ?
At this point I am sure you realized what seems to be the best statement is a combination of both. Let’s try: “Over the next 10 years, I want to finance benevolent organization working to clean the seas because it is important to me. I will dedicate for that 50k$ that i will earn and distribute over this period”. Looks better, no ? You have a timeline, an amount, a what and a why. We could no argue to start with why, but it is not the topic for now…
Now back to basics, we are not all philantropists. Have you ever thought about your objectives, short-mid-long term ? It is honestly not easy to do, sometimes because you do not know where you are going to be in 5 years. Depending on your current age, that can differ a lot indeed. Being transparent, it is still something I have to do, and I should have started with that. I understood what I was doing and convinced of the intrinsic value, but I did not know why I was doing it. Did not seem relevant at the time, did not even think about it.
Indeed, “Boy oh boy” was I wrong. It would have helped me avoiding all the investing mistakes I made in the past. No back bone to what I was doing, so of course it went in all direction. What I have now is a highly diluted portfolio that is also largely risky. Too risky I might add. And now I am a bit stuck, as balancing the picture would lead me to lose a good sum of money. I am patient and I will take the time to give meaning to my choice for when my investments goes up again, I can act and either make a few buck or at least not lose too many. Then what is back in my cash flow I can distribute to what I know to be relevant for me to attain my objectives.
So do not be like me, take a new paper not and a pen and write down why you want to do what you want to do: “I want to fully support my children studies when they are of age, so they do not have to bother themselves with that. I need to save Xk$ in the next Y years to do so”; “I want to buy a Porsche because why not, in 3 years time. I need to have 20k$ in my account to do so”. When this will have been done, you will be able to focus on what matters next: asset allocation.
