Financial Data
Updated 25 Feb 2020


Set your key financial goals (and achieve investment success)

Financial planning should start and end with your financial objectives, be they short, medium and/or long-term. You need to be clear as to what these lifestyle goals are before you even think of where and how you should invest your money. 


Bruce Fleming, 07 April 2017  Share  0 comments  Print


All the answers to your unique business lifestage questions

Building your wealth should be divided into short, medium and long-term goals and the investment process for these goals should be very different.

1. Short-term goals 

Short-term goals are any goals that you are looking to achieve in the next year to three years.  

These goals will include building up an emergency fund of at least three months’ salary, planning a trip or saving for a deposit on a car. The underlying investments that you use should be low risk and should be made up predominantly of cash as the time period is very short. The investment vehicles you should be using are money market accounts and solutions that you are able to access very quickly.

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2. Medium-term goals

These goals are financial goals that you should look to achieve in the next three to seven years.

This would typically include saving for a deposit on a house and children’s education. Because of the time period of the investment you can afford to take a little more risk than for your short-term goals and you should look more at a balanced type fund that targets a return of 3-4% above inflation. 

Should your rate of tax be above 30%, you can make use of an endowment investment vehicle for two reasons. Firstly, the underlying interest and rental income in an endowment vehicle are taxed at 30% within the fund, which means you will be saving tax should your marginal rate of tax be higher than 30%. Secondly, if your financial goal is longer than five years, you are limited to the access you will have to the funds, thereby taking away any temptation you may have. 

Should your financial goal be less than five years or should your marginal rate of tax be below 30%, you can make use of unit trusts. Using unit trusts as your investment vehicle will allow you unlimited access to the funds, but you must remember that you will be responsible for any tax payable.

3. Long-term goals

Long-term goals are typically retirement goals. You need to decide what you need to live off in retirement and what your capital expenses will be in retirement.

Once you have done this, a financial planner can help capitalise the amount you will need at retirement to meet these goals and assist you in how to achieve it. If your retirement date is 10 years or longer you can afford to take more risk and target a higher rate of return on your investments.

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Retirement annuities are great vehicles in which to save for your retirement. With new retirement reform legislation, you are able to deduct up to 27.5% of your taxable income when contributing to a retirement annuity. However, be careful that you don’t use a retirement annuity vehicle for all your retirement investments as it is very inflexible both while you are saving and in retirement. Consider using an endowment vehicle or unit trust to fund your capital expenses in retirement as they are flexible and you have unlimited access to the funds. 

If you segment your wealth aspirations accordingly, you’ll be able to achieve success where many others have stumbled in the past.

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About the author


Bruce Fleming

Fleming has been involved in the financial planning industry for approximately 20 years. He began his career as a legal advisor at Old Mutual, assisting some of the top financial planning businesses in the country. Prior to that Bruce was practice development manager at Acsis. In addition to this he has been consulting to private clients for the past 16 years, firstly at Consolidated Financial Planning, then as an advisory partner at Citadel Wealth Management and now at Old Mutual Private Wealth.

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