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The Importance of a Road Map in Reaching Our Financial Goals


Jun. 22, 2015 Kiplinger

One of my favorite movies is Vacation, starring Chevy Chase as Clark Griswold. The story concept is quite simple. Clark has a goal in mind and drives his family to Walley World from Chicago to see a bit of America along the way. A quiet cross-country drive would not make for an entertaining movie, so the family encounters outrageous obstacles and problems along the way.

Throughout the movie Clark is determined to reach his goal no matter what unfolds. It’s the same mental perseverance we all need when we create a financial goal. When we are caught up in the moment and distracted by personal or world crises (such as crashing your family truckster in the desert), it is easy to lose sight of the big picture. This is where financial professionals or investment management tools can help you make the necessary course corrections and adjustments along the way.

When we think of goal-based investing, it begins with determining if this is a long-term or short-term objective. The strategies underneath should be quite different, and many make this mistake when they use a single allocation and risk tolerance across all of their investment plans. Risk tolerance is a measure of how much volatility or market movement one might be comfortable with. As a guideline, the shorter the time until reaching the goal, usually the more conservative the portfolio.

Longer-term goals might be education planning or retirement. It may be 15 years or more before needing access to these funds. Shorter-term goals could be things like saving for the down payment on a home, a family vacation, or a new car. Typically these are targets of five years or less. The shorter the duration, the more a single event in the financial markets could have a major effect on your plan.

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