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Investing is like a long car trip. There's a lot
of planning that goes into it.
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How
long is the trip? (What is your investing "time
horizon"?)
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What
should you pack? (What type of investments will
you make?) |
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How
much gas will you need? (How much money will you
need to reach your goals?)
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Will you need to stop along the way? (Do you
have short-term financial needs?)
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How long do you plan on staying? (Will you
need to live off the investment in later years?)
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Running out of gas, stopping frequently to
visit restrooms, and driving without sleep (this
is the last of the travel analogy, we promise)
can ruin your trip. So can saving too little
money, investing erratically, or, as we said
in Step One, doing nothing at all.
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You must answer the following questions before
you can successfully set about your savings/investing
journey:
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How much money can you devote to a
regular investing plan? What are your goals?
Is this money for retirement? A down payment
on a house? Your child's education? A second
home? Income to live on in the proverbial Golden
Years?
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How much money can you devote to a regular
investing plan?
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How much yearly income is reasonable
for retirement?
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Don't worry ... you don't have to do all the
math yourself. There are online interactive
calculators available that can help you figure
your future money needs. The more specific you
can be, the more likely you are to set and achieve
reasonable goals.
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After you have a rough idea of how much money
you'll need and how much time you have to get
there, you can start to think about what investment
vehicles might be right for you and what kind
of returns you can reasonably expect.
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