Why you need Goals Based Investing? Q&A with Sarah Riegelhuth

Goals Based Investing has lots of support from investment / financial professionals. We are a believer at BetterWealth. So much so that the first test version of our product was 100% centered around it.

In our product testing, clients feedback showed that most people don't invest for goals. Majority of people invest just to make more money - without any specific targets or goals at all. 

Very few people, like less than 10%, had a goal of reaching the magical $1 million mark. An amount that represents Financial Independence for many people. But even these people can't say why their goal isn't $1.5 million or $800,000. Try our Financial Freedom Calculator to estimate the right number for you.

Clearly, the investing public have not 100% bought into the idea of Goals Based Investing. With that in mind, we went to speak to an expert on the matter. Sarah Riegelhuth (@SarahRiegelhuth) is the cofounder and CXO of Wealth Enhancers and author of Get Rich Slow. They are an independent financial advice firm that uses Goals Based Investing with 100% of their members (clients). 

She did a short Q&A with me about why Goals Based Investing rocks.

sarah

 

Q: Why does Wealth Enhancers believe in Goals Based Investing so much?

Our main focus is to get members to understand the difference between having money and being happy. We use Goals Based Investing for every member to achieve this.

As a society, we don't really get taught about the use of money or what it's actually for. Money is simply an enabler for you to create the lifestyle you want. When new members come to us, they are often focused on building wealth for the sake of building wealth. They haven’t necessarily spent time to determine what lifestyle they actually want, and connecting their wealth creation goals to that.

When you figure out the lifestyle that you want, your goals in life will naturally fall out of that. You will know what you should be, or want to be, working towards. Within that context, having and making money makes sense. It is also easier to understand why you are saving or investing in the first place. 

 

Q: What real benefit to Goals Based Investing have you seen with your members?

There are lots of benefits. The most simple example is that it makes you more disciplined in your spending. 

Let’s say a member has a goal of putting their kids through private school in a few years, or spending 6 months living overseas … it could be anything. When they have the urge to buy new clothes, or spend big on a night out or anything really, they have to reach into the kid's school funds or the overseas travel account. At that moment, they know the exact trade-off they are making. They are far less likely to splurge on the things they don’t really need when they’ve spent the time identifying what they do want, and what’s important to them.

 

Q: What's involved when Wealth Enhancers set up a Goals Based Investing plan for members?

There are a few steps and we have a specially designed process for it. At a high level, it starts with working out your ideal lifestyle. Out of that we will find out what the goals are. Then we estimate how much income you need to afford those goals and the lifestyle. 

It is then important to set goals around how much money you can save and invest now. Then match an investment strategy to the goals. One strategy per goal.

After all that, you have to be diligent in tracking and monitoring progress. We see the ongoing support, accountability and coaching as a key part of good financial planning.

 

Q: What are the common goals that your members have? 

Well, we purely work with high-performing Gen Ys. Our generation tend to want freedom and control. I’d say the most common short term goal is having funds available to travel each year, and a common longer term goal is to reach financial independence. Having enough money to work on what you enjoy, rather than being a slave to a job that you don't like.

All that being said though, more often than not our members will have 5 to 10 different goals, that are all very personal and unique to them. A lot of what we do is about prioritising those goals, and working out the best strategy to get them there.

 

Q: For someone just starting out on their journey of improving their finances, what are your actionable tips to get started?

  1. Set Goals: imagine the lifestyle that you want and what financial resources you will need available to achieve it;
  2. Get Started: no matter how big your goals are, or how far away they seem, the most important thing is to start. Whether it is paying off credit cards, saving or building a portfolio, you have to start somewhere;
  3. Separate accounts: create one account per goal. The more you can separate the more real it becomes when you have to fight the ‘urge to splurge!’;
  4. Invest your money: Gen-Y have time on their side. It is really important to start investing in growth assets. Whether that is shares or property. Keeping money in cash will not provide enough returns in the long term to meet your goals.

 

Interested in getting help in creating a plan to get to your dream life? You can get in touch with Wealth Enhancers here

 

About the Author

jeremykl

Cofounder & CEO of BetterWealth (@jeremykwonglaw). Former investment banker turned technology entrepreneur. muru-D alumni (Telstra startup accelerator). Passionated about leveraging technology to provide better financial products & services to consumers. Coffee snob, business book reader, and fitness fan.

Leave a Comment