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Set up Your Investment and Skills Goals like a Pro

By Michel Akili Last updated: July 11, 2024 30 Min Read

Table of Content

Introduction
Understand your current situation
Define specific Goals
Prioritize Goals
Smart goals
Short-Term, Intermediate, and Long-Term Goals
Investment Vehicles
Risk Tolerance
Diversification
Track progress
Learn continuously

INTRODUCTION

Setting investment and skills goals is crucial for financial success. if you want to be sucessful there's some rule to consider et make sure it done.

In this article will learn to set up our investment and kills goals in 10 steps. Before we dive in our article let us try to understand the meaning of the word success, the word success have several defition but will keep the defition as "the accomplishment of what you set out to achieve". It’s reaching your desired outcomes or targets.

Assess your financial health, income, expenses, and existing investments. Consider your skills, knowledge, and career trajectory.

Financial health: refers to the state of your personal monetary affairs. It encompasses various aspects, such as savings, retirement planning and expenses. Strong financial health indicators include steady income, minimal expense fluctuations, robust investment returns, and a growing cash balance. To improve your financial health, assess your net worth, create a budget, build an emergency fund, and manage debt wisely. Remember always that, everyone’s situation is unique, dont make you presure, so tailor your financial plan accordingly to your current situation, your own and you will grow up with the time!
Income: refers to the money you earn or receive, whether from labor, business, investments, or other sources. It’s the gain or recurrent benefit usually measured in monetary terms that comes in during a specific period of time. For example, your salary, rental income, or investment returns all contribute to your total income.
Expenses: the word expenses refer to the money you spend while doing something, especially in the course of your work or for a specific purpose. They can include costs like rent, maintenance, wages, and other business-related outlays. For instance, living expenses cover daily necessities, while medical expenses relate to healthcare costs. don't neglite your expenses no matter what, try to calculate out how much is 0.1$ multiple by 1000, keep track always of your expenses if you want to manage your finances effectively.
Existing investments: Is simply the assets (including securities, cryptocurrencies and all type of assets) held by a company or its subsidiaries. These assets were acquired either before a specific issue date or afterward based on agreements or obligations in effect at that time. In simpler terms, they are investments that already exist within a company’s portfolio.

The management of your income wisely play a great rule to the well-being of your financial.

2. Define Specific Goals

Be clear about what you want to achieve. Are you saving for retirement, a home, education, or a business venture? Make each goal specific and measurable.

Retirement savings: Is to the money you set aside during your working years to support yourself after you stop working. It’s essential for maintaining your lifestyle during retirement. Experts recommend saving at least 10% to 15% of your pre-tax income annually for retirement. To estimate how much you need, consider factors like your desired lifestyle, inflation, and life expectancy. When it comes to retiment savings consider high risk assets not desirable. You can use online retirement calculators to tailor a savings plan that aligns with your goals.
New home and Education: When it comes to saving for education expenses, especially for college and trade programs, training and online short courses 529 plans are a popular choice. Here’s what you need to know:

529 Plans: These state-sponsored accounts offer tax-advantaged savings for education expenses. They cover college, trade, and vocational courses, as well as qualified K-12 expenses. Recent expansions even allow 529 funds for apprenticeship programs and student loan repayments without tax consequences or penalties. You can open a 529 plan regardless of your income level, and the earnings grow tax-free. Plus, withdrawals are tax-free when used for qualified education expenses like tuition, room and board, books, supplies, and certain K-12 costs.

Savings Accounts: Another option is a regular savings account. While it lacks the specific tax advantages of a 529 plan, it provides flexibility and liquidity, and you can use it to save for various goals like for a new home, new car and vocation.

Business venture: Is the funds set aside by entrepreneurs, good employees and business owners for their ventures. These savings serve various purposes, such as covering startup costs, expansion, emergency funds, or capital investments. Business owners can choose from different types of business savings accounts, including high-yield traditional savings accounts and money market accounts. When selecting a business savings account, consider factors like interest rates, fees, and accessibility to find the best fit for your specific business needs and goals.

3. Prioritize Goals

Rank your goals based on urgency and importance. Allocate resources accordingly. Certainly!

Resource allocation involves identifying and assigning available resources to an initiative. here are some steps you can follow if want to rellocate resources effectively,

Define Project Requirements: Understand project objectives, deliverables, timelines, and stakeholders to identify necessary resources.

Assess Resource Availability: Determine the availability of team members, budget, tools, and other assets.
Schedule & Assign Resources: Allocate resources to specific tasks based on priority and importance.
Track Utilization & Capacity: Monitor resource usage and adjust allocation as needed.
Re-evaluate & Adjust: Continuously review and adapt resource allocation to ensure optimal utilization and project success.

Please to keep this article short and understanding we cant explain everything her Learn How to Priotize Goals

4. SMART Goals

Apply the SMART framework:

- Specific: Clearly define each goal.
- Measurable: Set quantifiable targets.
- Achievable: Ensure goals are realistic.
- Relevant: Align with your life and aspirations.
- Time-bound: Set deadlines

5. Short-Term, Intermediate, and Long-Term Goals

Distinguish between these timeframes. Short-term goals might include building an emergency fund, while long-term goals could be retirement planning or skill development.

Short-term goals: Is an objective you aim to achieve within a relatively brief timeframe. Usually weeks to a few months. These goals are stepping stones toward larger aspirations. Examples include completing a course, saving a specific amount, or launching a small project. They help you stay focused and build momentum toward your bigger vision.
Long-term goals: Long-term goals are aspirations you aim to achieve over an extended period-typically years or decades. These goals often relate to significant life milestones, such as buying a home, retiring comfortably, or achieving a certain career position. Unlike short-term goals, they require sustained effort, planning, and consistency. Long-term goals provide direction, shape your decisions, and contribute to overall life satisfaction.

6. Investment Vehicles

Choose suitable investment options based on your goals. Consider stocks, bonds, real estate, or mutual funds. Research brokers and platforms that align with your preferences.

What is stocks investment?:

Investing in stocks means purchasing shares of ownership in publicly traded companies. These shares are commonly referred to as stock. When you own stock, you become a partial owner of the company. If the value of the stock increases, you can earn a profit by selling it to another investor. Most people invest in stocks online through brokerage accounts, which allow them to buy and sell shares in various companies. It’s a powerful way to grow wealth over time because of the compound Interest! We explain the Compound interest

What is Bonds Investment?:

Bonds are fixed-income instruments where individuals lend money to governments or companies. When you own a bond, you become a partial owner of the issuer. The bond pays fixed interest (called the coupon) to debtholders. Bond prices fluctuate based on interest rates, and they have maturity dates when the principal must be repaid. Bonds are used to finance projects, infrastructure, and operations. They’re a key asset class for investors, alongside equities and cash equivalents. consider to doing more reaserch or ask for advice to your financial adviser before investing in bonds.

What is real estate investment?:

Real estate investing involves purchasing property with the goal of generating income, rather than using it as a residence. Investors can rent out properties, fix and flip homes for profit, or you can explore online platforms and real estate investment trusts (REITs) to diversify your portfolio. It’s a flexible way and a lower risk asset which help to build wealth and potentially create passive income streams

What is Mutual Funds?

Mutual funds are pooled investments managed by professional money managers. When you buy shares in a mutual fund, you gain part-ownership of a diversified portfolio of stocks, bonds, or other securities. These funds provide access to a mix of assets selected by the fund manager. They’re popular among middle-income workers, offering automatic investing and lower risk compared to individual stock purchases. Fees, such as expense ratios, impact overall returns. About half of American households invest in index equity funds, mirroring major market indexes like the S&P 500 or Dow Jones Industrial Average.

7. Risk Tolerance

Understand your risk appetite. Conservative investors may prefer stable assets, while aggressive investors seek higher returns with greater risk.

Let’s explore stable and risk assets:

Stable Assets:

- Savings Accounts: These are low-risk, interest-bearing accounts held at banks or credit unions.
- Certificates of Deposit (CDs): Time-bound deposits with fixed interest rates.
- Kenyan Savings Bonds: Government-issued bonds with minimal risk.
- Kenyan Treasury Bills: Short-term government debt securities.
- Cash: Highly liquid and safe, but offers minimal returns.
- Gold: A traditional safe-haven asset.

Risk Assets:

- Equities (Stocks): Ownership in publicly traded companies. Prices fluctuate daily. (Equity bank, Safaricom, Jubillee Holding and Bamburi Sement.)
- Corporate, Municipal, and Government Bonds: Varying levels of risk; rated by agencies like Standard & Poor’s and Moody’s.
- Commodities: Risky due to market volatility (e.g., oil, metals, agricultural products).
- Real Estate: Includes rental properties, commercial buildings, and land.
- Cryptocurrencies: High risk and reward nature.(BTC, ETH,SOL,BNB,POLKADOT, LISTA,DOGECOIN AND XRP)
- High-Yield Bonds: Riskier debt instruments with higher yields.
- Currencies: Forex trading involves risk.(US DOLLAR, KENYAN SHILINGS, CDF, EUROS, BIF and YEN JAPON)

8. Diversification

Spread your investments across different asset classes to reduce risk. Avoid putting all your eggs in one basket.

Explaination of “Don’t put all your eggs in one basket” this emphasizes diversification. It means spreading your investments across different assets rather than concentrating them in a single place. By diversifying, you reduce risk. If one investment performs poorly, others may compensate. Imagine your financial portfolio as a basket: too many eggs (investments) in one place could lead to significant losses if that basket falls. Diversification helps protect against unforeseen market shifts and ensures a more stable long-term outcome.

9. Track Progress

Regularly review your goals and investments. Adjust as needed based on life changes, market conditions, and personal circumstances.

10. Learn Continuously

Invest in your skills and knowledge. Attend workshops, read books, and explore online courses. Lifelong learning enhances both financial and personal growth.

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