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Begin At The End
By Kai | August 2, 2007
How do we work out our investment plan ?
Like every great mystery writer, the best way is start at the end and work your way backwards. That’s why the goals and objectives which you defined earlier will help you to reverse-engineer and formulate a plan - what do you need to do specifically in order to achieve the goals ?
Start with your retirement plan and work back to your day-to-day needs. Your current liquidity is of course the primary need. Look at your current expenditure and income, and estimate what cash flow you require to maintain for comfortable living. After we have carved out a comfort zone for your primary liquidity needs, retirement plans are the best place to start, for several reasons.
Firstly, investments setup for retirement are often protected from situations like bankruptcy and lawsuits. Secondly, there are often good tax advantages associated with retirement plans, such as 401(k) plans, deductible and Roth IRAs, Keoghs and SEPs.
Young investors may be a little skeptical about taking from their pool of available investment funds for long term retirement investments. However the more you have provided in your retirement nest, the better you will feel about your other high risk/high yield investments. And that will go a long way in upkeeping a healthy psychology which is an important part of making good investment decisions.
Let’s now see how much money you need to start investing…
Topics: Basics |
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August 2nd, 2007 at 9:44 am
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