Investment Goals

[penny]

Hi All,

I've posted a few times now and each time the replies have highlighted knowing what your goals are.

Right now, I have only got my PPOR and am looking to buy my first IP.
Before I do that I want to have worked out what my goals are and I'm having trouble working that out. Loosely, I know I want to invest to have 'financial freedom' in the long term. But financial freedom is not specific enough.

I thought it would be a good idea, if others don't mind sharing, to ask how other people set their goals, what they are and how they worked out their strategy and timeframes to achieve them.

Conversely, please tell me if I'm over analysing this process!

cheers
Penny

 

[Simon]

What are your plans workwise? Is early retirement a goal? If so then you need to calculate how much property and/or shares you need working on your behalf to achieve the income you believe will make you comfortable.

I am aiming at $4M (in todays dollars) plus a PPOR.

This may well change over time but it is a target I now believe to be achievable.

Once I wouldn't have believed I could have been worth that much and at that point it was an impossible goal.

So goals are as much for your beliefs as for your investing!

Cheers,

 

[The Y-man]

I generally (have) used a net worth and/or income goal for a 12 month (short range), 5 year (mid range) and 10 year (long range) plan.

eg.
By Year xxxx
Net worth $xxxx
Passive income $xxxx
Worked income $xxxx

etc.

Cheers,

The Y-man

 

[Glebe]

For me, I consider 'financially freedom' achieved when I have $2m in net worth.

So I worked out how quickly I could get there if my current net worth doubled every 5 years. Your worth doubling every 5 years might sound fast to some people, which is about 15% compounding, pretty doable.

I then used that to work out when I should be worth $500k, $1m, $1.5m, and then $2m.

I'm currently about a year ahead of my expected progress so things so far are going well.

 

[twobobsworth]

There is a good goals workshop audio that Anthony Robbins does.

 

[The Y-man]

Loosely, I know I want to invest to have 'financial freedom' in the long term.

cheers
Penny

Well there's a start - you can define F/Freedom as having enough passive income to meet your lifestyle needs.

Now at what level you define that lifestyle needs is up to you - but let's say you (from budgeting) decided that $60,000 pa is enough to support you in "decent" comfort.

Your goal then can be set as "acheiving $60k passive pa by xxxx"

This is also where the interchangeability (to a certain extent) of passive income and net worth comes in.

For instance, if you can confidently generate 6%pa from your captial, then you would need $1m in net worth to theoretically do this.

As you go along your journey, you may discover:

1. you need more than $60k per year to live comfortably (ie. your tastes change! )

2. you need to adjust for inflation and tax (I tend to suggest keep it simple to start with - worry about the technicalities later...)

3. you discover ways to generate more than 6% pa (or whatever) from our capital

4. you can increase your personal exertion income in some way

.... all of which can shorten or lengthen the forecast time required to get to the milestone.

The proviso being of course that what I have outlined above is a purely financial aspect. You may then need to add conditions, such as "and have a child per year" etc (sorry, couldn't think of any pertinent examples off the cuff)

Hope this helps.

Cheers,

The Y-man

 

[Kenster]

Penny,

It's important to understand your dream, what makes you tick.

Goal by itself does not mean much. It won't have enough punch to give one's a lasting power to move forward.

The real power is created when goals are combined with dreams.

As human beings, what we do and act is based on two basic emotions: those that we hate to do ("The pains") and those that we love to do ("The pleasures"). The pain has the pushing power and the pleasure has the pulling power.

Dream is the ultimate cultivation of these two emotions. It's a unique combination for each individual. None of us have exactly the same dream. When dream is matched up with goals, it will give us limitless energy, laser focus and non-recognition of faillures.

The following are the steps I used to work out my life purpose:

1. Determine what you do *not* want to do in life
2. Determine what you *do* want to do in life
3. Determine what your priorities are and what is in your way
4. Write your own eulogy
5. Write your life purpose on paper

Note, the eulogy in step 4 has nothing to do with life or death. It's a way to work out what is really important to us and to put things in perspective. As someone has said: By the death bed, no one ever said "I love my job the most".

Cheers.