One common mistake I see new investors make is an all or nothing investment strategy. They tend to either have all their money in cash (often because investing ‘correctly’ continues to freak them out... so they stall and sit in cash), or they go gung-ho and invest the lot in something that may be higher risk which doesn’t fit with their goal. Then have to try and unscramble an egg.

Instead, you need to align your financial game plan to the specific goals you’re working towards. I generally say work on no more than 1 short, 1 medium, 1 long term goal and 1 retirement goal at once...any more than that can get overwhelming and see you stretching your money too thin to get your goal achieved (obvs not always, you do you). But also, don’t just do your short-term goals... then you will never get ahead for future you!

So, to get these right there are a few steps you need to have completed first... You need to have clarity on your financial goals (I am somewhat obsessed with this and went down quite a neuroscience rabbit hole to build out our Goals Setting Module in The Greenhouse because so much of what you see online about how to do this is not what neuroscience says works!)... and you also need to have a very clear Cashflow plan – there are a few different ways to do this, past Greenhouse Members, you know which one I think is the best option! Once you’ve done these you can start then figuring out how you are going to invest for each goal.

Medium term financial strategies can be tricky. The thing to ask yourself is how much safety do you need vs how much risk are you willing to take? Given it’s a short time frame, if you take too much risk you could have a situation of, well, just bad timing when it comes to markets. This needs to be factored in but here are a few options assuming you are thinking the goal is closer to 2 years away than 5 and aren’t prepared to take a great amount of risk:

High interest savings accounts

Yawn. I know. Boring. Low returns. Nothing sexy... but it’s safe. Except from You (which may be a big risk that you need to consider!). Use this when you need ultimate confidence that the money is there when you need it. Remember there is a Government Guarantee for up to $250k per financial institution.

Beware... the bonus interest amounts! Sometimes the interest can look good, but there is often fine print. Maybe that rate is only for a few months, or you need to deposit a certain amount a month, make a certain number of transactions from that account, stand for a long period of time on your head whilst juggling. You get my point. It can look good, but not actually work for what you need or be too complicated to achieve all their requirements and thus, you miss out on the bonus interest amount.

Term Deposits

TD’s have an extra layer of safety... safety from You. Whilst it is effectively having your money in cash, it’s generally locked away for a set period for an agreed fixed rate. You can break them, but it normally comes with penalties... so the temptation generally gets taken off the table. TD rates over the last few years have been, ahem, crap. But there appears to be some offering over 5% interest... which is over the current inflation rate and most high interest saver standard rates, with the safety of cash.

Bonds

You could also consider investments in the fixed income index... made up of Government and Corporate Bonds or individual Bonds. Effectively you are loaning them money for a return, making you the bank to the banks/various other companies and Governments. Wild but true.

You should get your head across interest rate risk, credit risk and liquidity risk on these. I did a bit of research on the performance of some of these and well... they leave a bit to be desired.

One I looked at, for example, had a 5-year average net performance figure of –0.3%... and whilst I am ok with negative returns as part of usual market cycles, we ultimately expect to hold for a long period of time to get back into good gains territory. But if you are only holding for a short period of time and you need to sell (to do the thing that you invested for in the first place) before they have made good gains... it may have been all for, well, nothing.

If you want the complete guide to investing, make sure you join The Greenhouse next week when doors officially open. You will get everything you need (including risk profiling calculators, investment platform comparisons and sleep at night investing risk plan) to correctly invest for each of your goals.

Jess

PS. Over the next few weeks I am ramping up my emails (I’mmmmm back! No very annoying and potentially life-threatening infection can hold me down). The reason I will be sending so many emails is because we have some seriously amazing things to help you with your money. And I know that's what so many in this amazing community need right now. So, if now's not the time I get it... you don’t need to unsubscribe, we will return to regular programming once our Greenhouse Doors close.

Have a money dilemma?

Money dilemmas can be a nightmare! They can leave you up all night ruminating about what to do, have you feeling alone and isolated or just plain ol' stuck. So, we are here to help. I am going to tackle one a week and give you my unbiased, no BS general thoughts on how to tackle your conundrum. We would love for you to send yours (or someone you know) in. 

Obvs all of this is general advice only... especially important to note any and all of the comments above do not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs.