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The new year is a time when many people find themselves setting goals and resolutions for the months to come. It’s also the perfect time to create smart investing habits that will benefit you not only for the next year but possibly for the rest of your life.
To help you on your investing journey, we spoke with two investing experts to discuss smart investing habits you can implement in 2022. From setting specific goals to diversifying your portfolio to focusing on the long-term, these habits can help you reach your short and long-term financial goals this year.
Have A Plan
One of the most important aspects of investing is setting specific financial goals and then putting a plan into place to reach those goals. In fact, if you sign up for a robo-advisor or meet with a financial planner, the first thing you’ll be asked to do is answer questions about your goals.
One of the reasons why having specific investment goals is that it makes it possible to reverse-engineer them to ensure you reach them.
Take retirement, for example. When you’ve set a goal of what age you want to retire and how much you want available to spend each year in retirement, you can figure out the dollar amount you’ll need to retire comfortably with, as well as how much you’ll need to invest per month to reach that ultimate goal. The same concept can be used to figure out how much you should save monthly for any financial goal.
When it comes to investing, start with the end in mind. Knowing your short and long-term financial goals can help you create and stick to a financial plan and help you build a diversified portfolio that’s appropriate for your specific goals.
According to Sara Stolberg Berkowicz, a CFP and Assistant Professor at the College for Financial Planning, mental accounting is another reason why setting specific goals is so important.
Mental accounting, a concept made famous by economist Richard Thaler, is the idea that people tend to mentally separate their money into different buckets. We think of the money in our checking account for spending, the money in our savings account for saving, and so on.
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