There are short-term goals, long-term goals, and some goals that fall in between. Usually, the differences can be boiled down to time and money. Short-term goals are achievable sooner while intermediate goals take longer and are more of a financial commitment.

Long-term goals usually take more than five years to reach.

If they involve money, they need a disciplined saving and investing strategy. The most important long-term financial goal for almost everyone is to save for retirement. For most people, this is a priority over saving for anything else.

The first step to reaching your retirement goal is to develop good saving and investing habits. Establishing a financial plan when you’re young can help with this. Also, start contributing to an employer’s 401(k) plan, an IRA, or a Roth IRA as soon as you start working. Consistently save, and you’ll be on the right track to gain enough money for your retirement years.

You can become a disciplined saver and investor several ways:

  • Set up automatic contributions to your retirement plans and investment portfolio from each paycheck. When you don’t see money in your bank account, you won’t spend it. Instead, you’ll save for your goals and your investment account will grow over time.
  • Try not to be emotional about your investments. Don’t jump in and out of your holdings based on what’s going on in the markets.
  • Watch your investments and risk tolerance, and adjust your portfolio when needed.

Time value of money.

The time value of money, a key concept in finance, is the increase in the amount of money because of interest earned over time. Basically, the earlier a person starts to invest, the greater the chance is for the money to grow and for interest to compound.

Think about it this way: With as little as $50 from each paycheck ($100 a month, $1,200 a year), you can save $48,000 after 40 years. Assuming a 7% annualized rate of return, you would have almost $260,000.

The bottom line? Start investing as soon as you can — even if it’s a small amount — to get the most bang for your buck. Reinvesting dividends and interest over time buys more shares in your account, which can help increase the value of your portfolio, especially for long-term goals like retirement. 

Track your investments.

It’s important to check in on your investments. We recommend reviewing your portfolio quarterly. Manage your risks by making sure your asset allocation is still in line with your goals — but adjust your investments only when needed. Also, remember to revise your financial plan if your goals change or you identify new goals.

What to do next.

Here’s a recap, in case we lost you at “time value:”

  • The most important long-term goal is saving for retirement. After saving for retirement, you can earmark extra money for other goals.
  • Reach long-term goals by being a disciplined saver and investor.
  • Consider the time value of money. Starting to invest when you’re in your 20s will produce a larger nest egg than if you start saving at age 30 or later — but it’s never too late to start.
  • Review your portfolio quarterly. Adjust your investments only when needed. If your goals change, revise your financial plan.