The first step to creating a sound investment plan is to establish clear, specific, and realistic goals. People sometimes over look this process. Having clearly defined objectives, however, can be a guide to developing and implementing a successful investment strategy. And a plan based on long term principles should increase the chances of reaching important financial objectives.

Some people might be hesitatant to set specific financial goals for a variety of reasons. Other commitments, such as work or family, may seem to occupy the majority of their time. Also, they may not be clear on how to balance competing goals or the best way to reach them once those goals have been established.

A study conducted by behavioral economists identified an even deeper reason for someones reluctance to set clear financial goals called the endowment effect. This is the tendency for individuals to overvalue their current circumstance and to undervalue opportunities to pursue future benefits. For example, some people may spend hours planning out the details of an upcoming vacation while spending little to no time to establish a clear set of financial goals to secure a comfortable retirement.

Goals provide a clear sense of direction, as well as the motivation to save and invest wisely. When clearly defined, establishing objectives can eliminate uncertainty that may generate anxiety about the future, prompting some people to avoid the topic altogether, ultimately falling short of their financial needs.

Begin by identifying your short, intermediate, and long term goals, such as saving to buy a first home, investing in your child’s college education, or financing your retirement. Each one should be specific, including the dollar amount you need to accumulate by a certain date. Once you’ve determined how much to invest each month, consider having that amount automatically deducted from your paycheck or transferred from your checking account. Instead of looking at a paycheck deduction as something you’re giving up today, view it as what you may gain in the future.