Setting your financial goals is a key step in taking control of your wealth. By determining what you’re trying to accomplish and assigning each of your financial accounts to the appropriate goal, you can ensure that your investments are aligned with your objectives.
What should you be thinking about when deciding which accounts should be part of each goal? All accounts in any one goal should have a similar time horizon (meaning when you’ll need the money) and should be similar in terms of how much risk you’re willing to take. For example, you might combine an IRA account with a 401k account (and possibly other accounts as well) into a “retirement” goal.
Combining accounts into these kinds of groups rather than managing each one individually lets you more efficiently manage your investments. It can also help you recognize and avoid risks that can build up across multiple accounts in your portfolio. And compared to lumping all of your accounts together into one giant pile, splitting them into goals can help ensure that you’re on track to meet each of your objectives. By combining similar accounts into the same goal, you can get a clearer picture of your financial situation and make better investing decisions.