Video courses › Planning: goals, retirement, common mistakes › Lesson 1

Goals and time horizon

Why you start from goals rather than instruments, and how the time available changes the reasoning.

Video lesson in preparation (AI-generated presenter). Full text below.

Lesson text

A financial plan does not start from the question "what do I invest in?" but from "what do I need this money for, and when?". A well-defined goal has an amount, a date and a priority: the emergency reserve, a major purchase in three years, children's education in ten, topping up a pension in thirty. Different goals have different timescales, and timescales change everything.

The time left before a goal is called the time horizon. Over a short horizon what matters most is not losing: if the money is needed in a year, a market fall might not have time to be recovered. Over a long horizon short-term swings weigh less and inflation becomes more relevant. That is why the same instrument can be reasonable for one goal and unsuitable for another.

Writing goals down has a practical benefit: it forces you to do the sums. How much would I need to set aside each month? Is that compatible with my income and expenses? If not, you can move the date, lower the amount or review your spending. The calculators on this site are for trials of this kind; their results are indicative and depend on the assumptions entered.

Goals change with life: a new job, a child, a home. A plan is not a document written once and for all, but something to look at again from time to time. And when decisions become important, a written plan is also the best starting point for talking to an authorised adviser, who is required by law to assess your personal situation before recommending anything.

In three points

• Start from goals (amount, date, priority), not from instruments.
• The time horizon determines which risk makes sense to consider.
• A plan should be written down, checked against the numbers and reviewed when circumstances change.

Educational and informational content only. It is not personalised financial, investment or tax advice. All investments involve risks, including the possible loss of invested capital.

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