By jahanzaib 
Charu Chanana, Chief Investment Strategist, Saxo Bank Any excuse to splurge on that designer bag or expensive outfit sounds well thought of when making that wishlist purchase. “I deserve it.” “I worked hard for this.” “When else am I going to buy this, if not now?”一 Some of these phrases seem too familiar to the ear that you could put it on your basket of monthly shopping vocabulary. While you definitely deserve these treats, your pocket may not be taking it as well as you thought it did.
This year brings us several reasons to spend, but it also brings to attention how we can start our year with better financial decisions than the last one or if that expensive Dior bag was worth eating instant noodles for until your next paycheck. A fresh opportunity to reassess how we spend our money and how to set healthy and reliable financial goals is what we can look at focusing on in the upcoming year.
Well, if you’ve not already set your financial goals for the 1st day of the year, how about we discover it together this time?
What are you investing for?
Do your financial goals sound more like 一 ‘I want to visit 2 new countries this year” or “I plan to save for my dream project from this year onwards”? 一 well, whatever they are, let’s sit down and divide them into small (1-3 years), medium (3-10 years), and long-term (10+ years) goals.
We could classify an emergency fund, vacation, or a major purchase as a short-term goal; a home down payment, education, or dream project fund as a medium-term goal; and retirement, financial independence, or investments for your children’s future as a long-term goal. You can modify it according to whatever aligns with you and your goals.
This helps you understand where your priorities in spending lie, which can help you further assess how you can allocate your money accordingly.
Let’s make it SMART.
Now that we’ve got the basics down, let’s get down to making it actionable, and being a little SMART with it wouldn’t hurt.
Specific: Something as vague as “save money” doesn’t really define your goal; a precise “Save $100,000 for a house down payment by 2028.” would go a long way to making it more actionable and attainable. This clarity helps you focus your efforts and resources effectively.
Measurable: Just like you state your tasks for the day on a to-do list, break down your goal into smaller, quantifiable milestones, such as saving $20,000 each year or $1,667 each month. You can use budgeting apps or spreadsheets to help you monitor your savings and ensure you’re on track.
Achievable: “Become a millionaire in the next 6 months” sounds about as realistic as “Find a talking dog,” so let’s start getting real with ourselves. Consider questions like, What’s your current financial situation? income? What is your saving rate?—would be a good start to building an attainable goal, and by conducting a thorough assessment of your budget, you can identify areas where you can cut back, adjust your lifestyle, or increase savings if required.
Relevant: While you definitely have your fitness and travel goals on that New Year vision board. How about a financial vision board highlighting goals that align with your broader financial vision and life priorities? Reflect on how achieving this goal will contribute to your long-term plans, such as financial security or homeownership. This is also a good way to keep you motivated and committed.
Time-bound: Set a clear deadline to create a sense of urgency and maintain momentum. Break down the timeline into actionable steps, such as quarterly reviews to assess progress and make adjustments. Use calendar reminders to keep your goal on the top of your mind and celebrate small victories along the way to maintain motivation.
Align with What You Can Tolerate
With every goal comes a risk to bear in mind, which is why it is always advised to take calculated risks. Every goal has a different risk profile, which is why it is important to be prudent with your risk tolerance towards your goal; for example, when we look at short-term goals, we prioritize our safety net and liquidity, like an investment in a high-yield savings account and investing in short-term bonds, to have it in hand when it’s required in an emergency. When we look at medium-term goals, we focus more on balanced growth and stability with diversified portfolios or balanced funds. In the long term, we take on more risk with equity investments to maximize growth in the long run. A simple hack to understand more about your risk tolerance is to assess it using online tools or consulting with a financial advisor.
Where Should I Put My Money?
Now that we’ve settled into classifying our goals and determining our risk appetite, we can now explore the different investment vehicles that help meet our goals.
Short-term investment goals can be met through high-yield savings accounts, certificates of deposit (CDs), or money market funds. For medium-term objectives, we can consider ETFs, diversified mutual funds, or corporate bonds. Finally, when we’re looking for long-term returns, we can consider index funds, blue-chip stocks, or thematic investments such as green energy or artificial intelligence.
To make sure your money is invested in the right place, it is always good to research products that align with your timeline and risk tolerance and start small if you’re unsure.
Account for Inflation
As the phrase goes, “With every penny earned, there is a hidden inflation cost,” or so everyone believes. When making objectives, keep inflation in mind, as it has the potential to deplete your funds before you realize it. A goal of saving $100,000 for retirement may need to be increased to $120,000 to allow for inflation over time.
A quick tip is to use an online inflation calculator to adjust long-term goals to help you be more risk-averse to the unknown future.
Monitor and Adjust Your Goals
Life is unpredictable; therefore, your ambitions may change. Regularly assessing your progress helps you stay on track with unpredictable circumstances. Set up reminders to examine your portfolio quarterly. Rebalance your investments if specific assets outperform or underperform. Schedule a mid-year financial check-in to reassess your objectives and strategies.
After all is said and done, it matters most to understand how much value money adds to your life. You will not be able to start planning until you are willing to give a long-term, sustainable lifestyle and investment a chance. That being said, it also does not imply that you stop spending on things that bring you joy; rather, it focuses on how you can appreciate the things you love in the long run, and when you eventually see it, a few adjustments here and there will be nothing to worry about.
For more information, please visit https://www.home.saxo/en-mena.