I am a great believer that we were not put on this earth to survive: we are here to live. With that, it's only human to want things: necessities like clothes, housing and food. Then, we look at the difference between the "needs" and the "wants..." and there's nothing wrong with wanting stuff: jewelry, a new car, vacation, or ultimately, a comfortable retirement. Regardless of the goal, there are four key factors involved in saving with a specific objective in mind:
The contribution amount: How much are you putting away periodically either weekly, monthly, or annually? Is it enough to realistically achieve the goal, and annually, are you increasing it for inflation? Remember: if the cost of inflation goes up by 3% next year, the dollar you saved this year will only buy .97 cents worth of goods next year.
Time Horizon: How much time do you have from the first contribution to the time you will need the money to achieve your goal? Can you adjust the timeframe for unknown factors (like a vacation or boat) or is it fixed timeframe, like your child's first year of college.
Total value needed to achieve the goal: Can it too be adjusted? Can you achieve the goal, more or less, by adjusting the total amount saved?
Rate of return: Are you taking into account any growth or loss that may be experienced on an annual basis by investing the money, regardless of the investment vehicle. Even in the most conservative of investments, interest rates will change, making it hard to determine a fixed return over a long period of time.
Unfortunately, along the way when saving for a long term goal there are pitfalls and potholes which sometimes derail temporarily the savings process. The most important thing to remember is to keep your eye on the big picture: that which you are saving for, and try to keep on track. When you run into a roadblock, don't fret: time will give you the opportunity to catch up... and never stop dreaming- you have the ability to make your dreams into realities!
