D Smith: Accomplish your financial goals

Focus on achieving your short- and long-term objectives within the risk tolerance you are comfortable with now and in your future.

When your money is not properly allocated, you may not be able to meet your financial objectives.

Here are common sense tips to get you started focusing on short- and long-term goals.

Identify your financial goals and then ask yourself how long it will take to achieve these goals.

Time horizon is a very important component as it defines an approximate date in the future when you need to access your money. You need a reasonable time frame to achieve any financial goal.

A short term goal can be time frame within a year or within five years; saving for Christmas or a new fridge will fall into the one year time frame.

Five years can cover a more expensive purchase such as a vehicle or perhaps retirement.

Short term and long term goals can compete against each other.

Life changes can affect your goals and change a short-term goal into an immediate goal, or a long-term goal into a short-term goal.

An example is a healthy person plans to retire in 10 years and this is considered a long term goal, however, due to health reasons now has to retire within six months.

The period of time to achieve a long term retirement goal has now been reduced to months instead of a decade time frame.

An investor profile questionnaire can help determine what kind of investor you are—it only takes a few moments for you to compete and helps you determine if you can withstand market volatility. Determining your risk tolerance is an important component of achieving financial success.

What is your comfort level or degree of acceptance in regards to investing? The sooner you need the money, the more conservative you’ll need to be.  In each calendar year, there will be highs and lows when you invest in fixed income or equity markets. Short-term saving and investment goals should be approached conservatively, while longer term goals can tolerate more risk.

Know what kind of investor you are.

Some investors want to bail out of the markets when a temporary market decline occurs. If you are a nervous Nelly kind of investor, you may choose to stay with conservative investing and saving strategies. In a low interest rate environment, it is difficult to grow your savings.

The average interest rate on a one year GIC is one per cent, making the compounding growth of savings a slow process.

Investing in equities with a long term horizon helps minimize the impact of short-term market volatility. A longer time horizon reduces the risk to equity exposure.

Combining your short term goals and long term goals can be used with a mixed strategy of savings and investing.

Start with a three-month emergency source of money sitting in a daily interest account as the first step in achieving your financial goals.

You can then choose a building block of using a balanced mutual fund for a blend of fixed-income and equities and an equity position for your long term investing goals.

Focus on achieving your short- and long-term objectives within the risk tolerance you are comfortable with now and in your future.

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