Financial Quick Takes Financial Goals
We’ve commented before on the mechanics of accumulating and preserving your wealth by building a low-cost, globally diversified investment portfolio aimed at your personal goals and risk tolerances. Today, let’s consider your money management from a different angle: What are your individual goals, and why do they matter?
Your financial goals are not just a part of your financial plans, they are the lead. They are the driving force that propels your financial journey. You have the power to set the course, to decide where you want to go. You can have the sturdiest plans around, but if they’re hitched to the wrong horse, they’re unlikely to take you where you want to go.
Turning the Bus Around
To illustrate, consider this 2023 anecdote about how a different system—a school bus scheduling system—ran aground due to misguided goals.
At a glance, the city’s plans seemed solid enough. It sought to streamline the number of routes needed to transport its thousands of students across some 150 schools. By this measure, their AI-driven project was a “success,” reducing 730 routes to a planned 600.
Unfortunately, these plans proved disastrous when it was discovered that fewer routes were the wrong goal for delivering overall improvement. On opening day, there were reports that “a ton of kids” didn’t make it to school at all; among those who did, “some students did not get home until almost 10 p.m.” The school system was forced to cancel classes for the remainder of the week to work on getting back on track.
Defining Durable Goals
At least when bus schedules run amok, the problem is immediately obvious. Unfortunately, that’s not always the case with your financial goals. Sometimes, errant choices made years ago or as a series over time are only obvious in hindsight. This is why we recommend you …
Establish your greatest financial goals sooner rather than later to give yourself the greatest chance to achieve them.
Prioritize your goals in case you can’t achieve them all.
Revisit them now and then, as life’s curves may alter your aim.
It’s also essential to define your financial goals as more than just desired dollars.
What do you want to spend your money on? How much will it cost?
When will the money need to be available?
These questions factor into how much you’ll want to set aside for each goal, how much you can spend in other ways, and, importantly, how to manage your investments over time.
By targeting well-crafted financial goals, we can better target your overall investment strategies and selections. For example, the money you won’t need to spend for some time can be invested in assets that are expected to deliver higher long-term returns but also exhibit a wilder ride along the way. The money you depend on to fund near-term goals should be protected against the market’s short-term changeability. The tickets here are investments that will probably deliver lower returns but more dependable outcomes.
Let Your Goals Be Your Guide
Admittedly, it can be tough to plan your financial future in a world filled with obstacles and opportunities. But the terrain only worsens in the absence of well-crafted goals. If you don’t know how much money you’ll need, when, and why, you end up chasing after the latest fads (buying high) or fleeing market risks (selling low). Beyond the financial damage done, the emotional toll can be terribly taxing as well.
Without personal financial goals to lead the way, investing becomes a pointless practice.
Not sure where to start? We offer a complimentary 15-minute call to answer your questions and to share how we can help.
This information should not be construed as investment, tax, or legal advice. This commentary reflects the personal opinions, viewpoints, and analyses of the Stordahl Capital Management, Inc. employees providing such comments and should not be regarded as a description of advisory services provided by Stordahl Capital Management, Inc. or performance returns of any Stordahl Capital Management Inc. Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this piece constitutes investment advice, performance data, or any recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Accessing websites through links directs you away from our website. Stordahl Capital Management is not responsible for errors or omissions in the material on third-party websites and does not necessarily approve of or endorse the information provided. Users who gain access to third-party websites may be subject to the copyright and other restrictions on use imposed by those providers and assume responsibility and risk from the use of those websites. Please note that trading instructions through email, fax, or voicemail will not be taken. Your identity and timely retrieval of instructions cannot be guaranteed. Stordahl Capital Management, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.