According to Schwab’s 2024 Modern Wealth Survey, those who write down their financial plans feel more in control of their finances and more confident of reaching their goals—but that’s just the beginning.

To make your plan truly effective, ensure it has these five components.

• Clearly defined goals. Your goals are a road map to where you want to go—so make them practical and attainable.

• Step 1: Divide your goals into three categories: short term (next 1–2 years); medium term (3–10 years); and long term (10+ years).

• Step 2: Attach a dollar amount to each category. The more specific you are, the more motivated you’ll be to reach that goal.

• Current financial snapshot. Calculate how much money you’ve already accumulated for each goal and how it’s being saved or invested. Then run those numbers through an online calculator (like the retirement calculator on Schwab.com) to see if you’re on track.

• Realistic savings targets. Once you know if you’re on track, consider how much you’ll need to contribute toward each goal. The earlier you start saving, the less you’ll have to set aside each year. For example, if you start saving in your 20s, a 10% savings rate (including any employer match) is a good goal. If you wait until your 30s, you may need to increase that rate to 15%–20%. Wait until your 40s and you may have to put away 25%–30% each year.

• Up-to-date risk profile. Evaluate the amount of investment risk you can stomach. This will help guide how much of your portfolio to allocate to stocks, to bonds, and to cash investments and is key to staying the course toward your goals during the inevitable market ups and downs. Your willingness to take on risk should vary depending on your savings goals. For example, if you’re nearing or entering retirement, you might be aiming to grow the value of your investments while satisfying your current income needs—so you probably don’t want to risk significant losses in your portfolio. A longer-term goal may allow you to be a bit more aggressive in your allocations.

• Realistic return expectations. A solid investment plan considers expectations regarding portfolio returns. These expectations aren’t year-by-year forecasts, but represent long-term averages used in your planning process. An experienced Wealth Advisor can help you run different scenarios and determine the best assumptions for your situation.

Donald Daigle is an Independent Branch Leader and Financial Consultant at Charles Schwab. He is a graduate of Harvard University with 32 years of investing experience locally in South Jersey. Some content provided here has been compiled from previously published articles authored by various parties at Schwab.

Charles Schwab & Co., Inc., Member SIPC.

This information is for educational purposes only and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, you should consult with a qualified tax advisor, CPA, Financial Planner, or Investment Manager.

Investing involves risk, including the potential loss of principal.