How to Put an Investment Plan in Motion
One of the best ways to determine how much money you need to invest toward reaching your goal is to play what-if with a financial calculator. You can find financial calculators all over the Web. Using a simple investment goal calculator, you can play with the following numbers to determine how much you need to invest per month to achieve your goal:
Investment goal: The total amount of money you need
Number of years to accumulate: Your time frame
Amount of initial investment: The initial amount you plan on investing, if any
Periodic contribution: The amount you plan on contributing on a regular basis
Investment frequency: How often you plan on making a periodic contribution; for example, monthly or quarterly
Rate of return on investment: The percentage return you realistically expect from your investments per year
Expected inflation rate: The average inflation rate over the time frame in which you plan on investing
Interest is compounded: Whether the returns on your investment are compounded, and if so, how frequently (monthly, quarterly, or annually)
Tax rates: Federal and state tax rates on your dividends and any capital gains
Even more common on the Web are short-term investment calculators. You simply plug in the current cost of whatever you want to purchase, the inflation rate for that item, your time frame (in years), your state and federal tax rate on your dividends or capital gains, and the percentage yield you expect from your investment, and the calculator determines how much money you need to invest today to reach your goal.
Pay yourself first is cliché for financial advisors, but it’s the best strategy for achieving financial goals on time. After setting your goals, make sure you’re setting aside enough money each month (or each payday) to achieve those goals according to the time frame you set.