There are two categories of investment objectives:
1. Objectives that are really constraints (needs)
2. Aspirational objectives (wants)
Objectives that are constraints (needs)
Think of these with whatever mindset works best for you. If you want to view them as obligations or liabilities that you are only aiming to meet because you must, that’s fine. If you would rather think of them as ‘responsibilities’, ‘challenges’, ‘part of growing up’, or even ‘blessings’, then go ahead. Whatever works for you.
The point is the same: not meeting these objectives would generally result in more than just basic disappointment or dissatisfaction. Missing one of these objectives could seriously impact yours or your family’s wellbeing or cause you to feel a sense of failure that is not trivial.
By ‘needs’, we generally don’t mean putting food on the table or having shelter. Although we know that these aren’t a given for many people, even in the UK, we are going on the assumption that if you have money to invest, then you have savings. And if you have savings, then you are meeting your basic needs already.
Instead, your ‘needs’ are a bar that you can set as high or as low as you want, and they will vary person-by-person. Being financially able to move from your one-bed rental to owning a two-bed house before you have your first baby might be considered a need by you. Sending your children to private school, supporting a family member with a disability, buying your mum a bungalow to retire in, buying your dad the car he always wanted, making a large charitable donation… these things represent varying levels of ‘need’ depending on what is important to you.
A need for one person might be considered an aspirational want by another. That’s ok and we shouldn’t judge one another. If you’re someone who ‘needs’ very little to be happy, then you may well find yourself amassing a large pot of financial wealth by foregoing material wealth, while the opposite might be true for someone who prefers the things that money can buy, rather than money itself.
Aspirational objectives (wants)
In some ways, your aspirational objectives are your ‘true’ objectives. After all, there’s little fun in having what you need, even if you’ve already stretched the definition of need. Wants are where the fun is at and thinking about one’s aspirational objectives is what often brings the passion and motivation to investing.
You might be thinking, “I’m not very materialistic, so I don’t really desire much”. But wants don’t have to be materialistic. Those practicing aggressive frugality in pursuit of financial independence are aiming to retire very early, often in their 30s. That is part of a set of aspirational objectives that are probably not described as ‘materialistic’; rather, they might be described as ‘leisurely’ instead. Or, if the plan is to swap paid work for volunteering, which we’ve seen people do, perhaps the aim of early retirement is in fact ‘charitable’. On that note, to give an extreme example of how aspirational financial objectives can be not materialistic, consider the objective of donating a large sum of money to a good cause. That’s hardly a materialistic objective.
Retiring early isn’t an aspirational objective shared by many, although it is garnering a growing following. More often than not, and even if you think you’re not materialistic, your aspirational objectives will be somewhat more tangible. Let’s face it – having some cool expensive stuff is nice. And for many people, even just being able to have things that we’ve grown up seeing other people have is a nice feeling. That is, going from being a have-not to being a have is a very real objective for some. That doesn’t necessarily mean Gucci shoes instead of Primark plimsols; it might simply mean finally owning a laptop you don’t have to wait 20 minutes for to start up.
Even less materialistic but still tangible is being able to afford to live in a nice home, and/or in a nice location. It doesn’t feel like a ‘materialistic’ objective, and yet it takes a lot of money to achieve, even with help from the bank. We’d bet that this is quite a common objective amongst our readers.
A third category of aspirational objective is going on holiday. This takes us back to the ‘no man’s land’ between needs and wants. Some of you couldn’t possibly imagine a year without a holiday, in which case the objective of a holiday each year is probably more of a need than a want. Some of you, however, will be used to seeing each holiday as something to actively save for, or it won’t happen. Others might distinguish between ‘holidays’ and ‘travelling’, with the objective of being able to, for example, not work for a year and go travelling instead. In that latter case, the expensive part might not be the travelling itself, but the foregone earnings from not working.
On that basis, there are four main categories of aspirational objective:
1.Having things
2.Living somewhere
3.Going places
4.Sharing
You might have objectives that don’t fit into one of these categories, but we reckon they cover a large chunk of aspirational objectives for most of you.
Worth thinking about
This article didn’t have the aim of actually helping you reach your objectives; instead, we want to help you think about what your investment objectives are and frame them in such a way that you can plan your actions around them.
If you want help framing your objectives and building a narrative around them that could help you achieve them, get in touch and we’d be happy to talk to you about how we think about our objectives.
To the pound 