Why Goals-Based Investing is The Right Strategy for 30-Somethings
THE QUICK & DIRTY
Investing feel overwhelming? Goals-Based Investing offers a refreshing approach, aligning your money with what truly matters to you. Learn how to make investing less about "beating the market" and more about achieving your unique goals.
KEY TAKEAWAYS
Goals-Based Investing ditches the Wall Street jargon and empowers you to invest in the life you want, whether it's early retirement, a dream home, or funding your next big adventure.
Instead of relying on unreliable risk tolerance quizzes, this approach aligns your investments with the exact level of risk needed to reach your goals, so you can pursue your dreams with confidence.
Goals-Based Investing transforms your relationship with money, making investing feel less like a chore and more like an exciting journey toward achieving your aspirations.
Why does investing always feel like a topic we need to be well-caffeinated to discuss? I promise it isn’t that scary. At least, not once you learn about Goals-Based Investing.
When it comes to the world of investing, maybe you’re just starting to explore or maybe you’ve been dabbling for some time. Either way, I’m here for it. It's great that you're taking the initiative to invest, and it's equally important to understand the "why" behind your investment choices. Knowledge empowers you to make informed decisions and build a financial strategy that aligns with your goals.
Unfortunately, most of the messaging around investing is wildly unhelpful. Let's face it, "growing your wealth" and "beating the market" – the usual mantras of investing – feel generic and overwhelming. They don't resonate with the specific dreams you're chasing: a family, a home, that unforgettable trip around the globe, or maybe even launching your own business. I’m guessing you're not interested in accumulating money for the sake of it; you want your money to work as hard as you do to achieve your vision of success.
Here's the kicker: many financial professionals use a powerful strategy called Goals-Based Investing, but they don't always share it with their clients. Why? That’s a story for a different post that I wrote called, What Most Financial Advisors Don't Want You To Know. Today, I'm here to pull back the curtain and show you how the strategy known as Goals-Based Investing is likely something you’re already doing, and is the key to unlocking the full potential of your investments.
What is Goals-Based Investing?
Let’s ditch the financial jargon and get to the bottom of it.
Goals-Based Investing shifts the focus from simply growing your wealth (or “beating” the market) to intentionally investing in the specific outcomes you want to achieve. It’s a personalized approach that puts your individual goals front and center, providing clarity and direction for your investment decisions.
Goals-Based Investing provides a framework to prioritize and achieve those goals with intention and clarity–whether it's buying a home in 5 years, funding your child's education in 15 years, or ensuring a comfortable retirement further down the road.
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You Said I’m Already Goals-Based Investing
You might already be practicing Goals-Based Investing without realizing it! Think about when you first set up your company 401(k). You probably selected a Target Date Fund, right? These funds are designed with a specific retirement date in mind. As you get closer to that date, the fund automatically adjusts its investments to become more conservative.
The fund starts with a higher-risk, higher-growth strategy when you're younger. As you approach retirement, the fund shifts towards lower-risk investments to help preserve your savings. This approach, in essence, is a form of Goals-Based Investing! You've set a goal (retirement), and your investments are aligned with that timeline.
Why to Goals-Based Invest in your 30s
Your 30s are a defining decade. This is the decade where your financial goals start to take shape. Instead of just aiming for an obscure dream of "building wealth," Goals-Based Investing allows you to tailor your strategy to all of your objectives. We’re talking about real, tangible milestones like buying a home, starting a family, or maybe even launching that passion project you've been dreaming of. Goals-Based Investing gives your money a purpose, a mission, a reason to exist beyond some vague future date. It's about living your best life now while still planning for the future you actually want. Most importantly, it provides an investment framework that helps you know whether or not you’re invested the right way, ensuring every dollar you invest is working towards a specific objective and not just floating around in the market abyss.
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Goals-Based vs Traditional Investing
Traditional investing often misses the mark. It’s founded in the unreliable notion of risk tolerance and market benchmarks, neglecting the one thing that truly matters – your individual goals. Forget old-school financial advisors droning on about "retirement" like it's the only worthy aspiration. You want to travel the world? Start a non-profit? Buy a vintage Porsche? (Okay, maybe not all at once...) Those are goals, and they deserve an investment strategy that's as personalized as your fingerprint.
Here's how Goals-Based Investing differs from the traditional approach:
Focus on Goals, Not Just Growth
Traditional investing often prioritizes maximizing returns, but Goals-Based Investing puts your aspirations first. Whether it's early retirement, funding your child's education, or starting a business, this approach aligns your investments with what truly matters to you. By focusing on your goals, your investment decisions become more meaningful and purposeful, increasing your chances of financial success and ensuring your money actively creates the life you desire.
Beyond Risk Tolerance
This is a big sticking point for me. Traditional financial advisors love their risk tolerance questionnaires (you may have taken one if you’ve ever opened an investment account, including your 401k). But here's the thing: those questionnaires are inherently flawed. Studies show that your answers are heavily influenced by your current mood and other temporary factors. Feeling optimistic? You might say you're comfortable with more risk. Just had a bad day? Suddenly, that risky portfolio seems a lot less appealing.
This means your risk tolerance isn't a fixed trait; it's a moving target. And basing your entire investment strategy on a moving target can lead to misaligned portfolios and missed opportunities.
Here's another critical point: even if your risk tolerance is genuinely high, it doesn't mean you should automatically opt for the riskiest investments. Let's say your goal is to buy a house in 5 years, and your savings are already well on track. Why would you jeopardize your progress by taking on unnecessary risk, even if you could stomach the potential volatility?
Goals-Based Investing recognizes this disconnect. It prioritizes your objectives and aligns your investments with the level of risk needed to achieve them, not just the level of risk you can tolerate.
Proactive Planning
Goals-Based Investing empowers you to take control. Instead of passively accepting a generic portfolio, you proactively define your goals, set timelines, and choose investments that align with those objectives. When you invest with a specific goal in mind, your money transforms into a tangible step towards a future you're excited about. This sense of purpose can make investing feel less scary and more like what it is, a step towards achieving your personal goals.
Mindset Shift
Goals-Based Investing requires a shift in mindset—from simply accumulating wealth to intentionally investing in your future. It's about understanding that your money is a tool to achieve your aspirations. This shift empowers you to make conscious choices, aligning your investments with your values and priorities. By actively shaping your financial future, you gain a sense of purpose and control, transforming your relationship with money from one of anxiety to one of empowerment.
Why This Beats the Typical Advisor's Spiel
You need to know that while Goals-Based Investing is not a new strategy, many traditional financial advisors default to a one-size-fits-all approach, often pushing products that may not be in your best interest. If they don’t talk to you about a financial plan and you don’t walk in with a clear set of goals, you risk being sold investments that align with your risk tolerance but not necessarily with your life aspirations.
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The Bottom Line
Goals-Based Investing aligns your investments with your values and goals, empowering you to take control of your finances and make your money work towards the things that truly matter to you. It's about living a fulfilling life today while building a secure tomorrow.
If you're ready to move beyond generic investment advice and create a plan that reflects your individual goals, Goals-Based Investing is your answer.
Stash Wealth offers financial planning services for 30-somethings who earn six figures.
Whether you’re saving up for Tahiti or a Tesla, we help you achieve your short-term and long-term financial goals.
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Written by Priya Malani
Founder & CEO
Priya is an industry thought leader and personal finance expert for HENRYs [High Earners, Not Rich Yet]. Her relatable, no-bullshit style has garnered attention from the largest media outlets in the country including Forbes, The Wall Street Journal, Business Insider, NerdWallet, and more.
