Want to achieve your investment goals faster? Start by tracking your finances

October 11, 2023

Achieving financial freedom is a long-term project that you are likely to be progressing towards for a large portion of your working life. 

While many of the principles of achieving your financial goals are straightforward, that’s not to say they are easy. Luckily, there are lots of people who have achieved their goals before you that you can learn from – not to mention the experience and expertise of your financial planner. 

Alongside determination, patience, and optimism, perhaps one of the most important steps you can take to achieve your goals is to be well-acquainted with your current financial situation. 

Read on to learn how knowing your numbers could help you to avoid the fate of many unsuccessful investors: not realising you’ve made unwise investing decisions until it’s too late to redeem yourself. 

It is more difficult to make suitable investing decisions if you don’t know your numbers

There is a lot to learn about wealth creation from the successful investors who came before you. But the unsuccessful individuals can teach you just as much about what to avoid in your journey. 

A few of the most common mistakes made by those who don’t achieve their goals include: 

  • Contributing insufficient funds to your portfolio
  • Allowing emotion to drive investment decisions
  • Investing in unsuitable assets or asset allocations. 

Perhaps more disastrous than any of these, though, is a failure to take stock of your financial situation. Without this clarity, you could be denying yourself the opportunity to course correct when needed. 

Financial planning is a lot like climbing a mountain. You can predict what conditions might be like as you ascend on your planned route, but you may not be 100% accurate. As such, you may find that you need to be flexible and adaptable to achieve your ultimate goal. 

There are several indicators to keep track of throughout your financial planning journey

If you’re to make the most sensible investing decisions for you at each stage of your journey, there are a few important metrics to keep track of. These include the following. 

Your preferred retirement date

Having a retirement date in mind helps you to keep track of the window of time within which you need to hit your investment goals. Regularly tracking how much of this window is left can give you a boost of motivation to keep pushing forward with your investment strategy. 

Your saving percentage 

How much of your monthly take-home pay are you saving or investing for the future? 

Usually, the more you can invest each month, the faster your pot will grow because investments will typically grow more quickly than other savings. Of course, there are likely to be fluctuations when it comes to money invested in the stock market, and you could get back less than you invested. Past performance is not a guarantee of future returns.  

Your portfolio balance 

This refers to the different types of assets that your portfolio is invested in. You might invest in equities, bonds, commodities, or other types of assets, and each one offers a different level of risk. 

Historically, equities have offered the greatest opportunity for generating positive returns that help your money to keep pace with, or outstrip, inflation. 

The balance that is most suitable for you will depend on your circumstances and your personal attitude to risk, so we strongly recommend consulting your financial planner for guidance.  

Your retirement income requirement

Based on the lifestyle you’d like to lead, and your goals for retirement, how much income will you need a year? Your planner can help you to calculate this so that you have an accurate figure to aim for. 

Any potential income shortfalls in retirement 

This refers to your expected income streams in retirement, and the difference between what they will provide and your income needs. Make sure you account for any State Pension you may be entitled to, as well as income from rental property or other sources. 

When you know how much these sources will provide each year, you can calculate the shortfall that your investments need to address. 

Your financial protection

Simply put, how have you protected your income from risks such as serious illness or injury that could prevent you from working? 

Even a short pause in pension or investment contributions can create a significant shortfall by the time you retire, so it’s important to have an effective protection plan in place. 

Regularly reviewing your finances could help to achieve your goals sooner

The world-renowned management consultant Peter Drucker once said: “What gets measured, gets managed”. In our experience, this is certainly true of your finances. 

In fact, the more you know about your finances, usually the faster you can progress towards your goals. This is because you can spot potential issues much sooner, and correct them before they become catastrophic. 

It could be helpful to develop a system for keeping track of the metrics that really matter to make this simpler. By taking control of your situation now, you’re also taking control of your financial future and giving yourself the greatest chance of achieving your long-term goals. 

Get in touch

If you’re ready to take control of your finances so that you can progress towards your long-term goals, we can help. 

Either contact your financial planner directly, email us at hello@ascentawealth.com or fill in our online contact form to organise a meeting and we’ll get in touch.