Category: Investing Strategy

PRISM Step 1: Prioritizing Your Goals

Now that I have something of an investment strategy in place, it’s time to take a closer look at how my money will be allocated to my financial goals. The AAII PRISM Wealth-Building Process, created by AAII Journal editor Charles Rotblut, is a five-step method for aligning my investment decisions with my goals.

The first step of PRISM supplies seven lessons and three worksheets to help determine what my goals are, why to start with them, the key components of my goals—including the timing and wealth required to fulfill them—and the importance of prioritizing goals as a jumping off point for building wealth.

I learned that in order for a goal to have any standing, it has to be personal to me. Though it doesn’t need to be the highest priority in my life, it has to be something that I care about and am willing to achieve. Otherwise, I could spend the rest of my days in bed watching the sun go up and down (just kidding, there’s no sun now that it’s December!).

Once I define these goals, they will begin to drive the decisions I make with my money. Charles suggests starting with life stages. What do I want to do with my money at different stages of life? I have a mix of short-term and longer-term goals, but I’m not really sure about the intermediate term.

I’ll admit, some of the worksheets went a bit over my head, but the main Prioritizing Your Goals worksheet was the most helpful. Here I was able to enter my goals, the number of years away each goal is, the amount of time I will need to spend on the goals, their priority, estimated cost and any comments I have about these goals.

My goal that is most imminent is making another $2,000 lump-sum investment into my Schwab brokerage account. Since my plan is for this to occur on the first trading day of January 2023, this goal is my highest priority and will depend on me sticking to my savings schedule.

Next on my list is a little heritage tour of Europe I’ve wanted to go on for years. Germany, Hungary and a little village in what is now Poland where my great-grandfather grew up before he left for the U.S. are high on the list. It will probably also include eating my way through Italy—my true motherland even though I’m 0% Italian! I haven’t entirely planned out the trip, so my cost is super estimated here.

Buying a house or piece of property somewhere, somehow is my third goal. To be honest, I’m not even sure if I want to own property (blog post on that coming soon), but I know that I don’t necessarily want to pay an increasing amount of rent for the rest of my life either. After some very vague number crunching, I came up with an estimated cost of $35,000 for this goal—but it will depend a lot on inflation and the housing market’s status whenever this goal is realized.

My longest-term goal is also my lowest priority: retirement. The upside-down smiley emoji attached to it means that this is probably an unachievable goal, but it’s on there anyway! I did some calculations involving inflation to figure out how much I would possibly need in the year 2062 when I might retire (that’s not a real year!). Charles discusses how some of these goals will be more realistic and others more aspirational. Retirement is a fever dream at this point for millennials and younger generations, but AAII’s lessons always keep it in the back of my mind. One thing that lessened the pain of just how aspirational retirement is for me was when Charles noted that even long-term goals don’t need to be fully funded by the time they are met. Retirement is an example of a goal where I could still be in the accumulation stage of building savings but be able to retire with what I have at the time.

Follow along with me as I venture through the PRISM Wealth-Building Process and solidify my financial plan for the future!

How to Create Your Investing Strategy

Now that I’ve come this far in my investing journey, it’s time to compile everything I’ve learned into my very own investing strategy!

When I started this blog, I knew it was always my intention to write down what my financial goals are and how I want to achieve them. My two touchstone resources for this process are AAII’s “A Lifetime Investment Strategy” guide and an interview that AAII Journal editor Charles Rotblut did with professor Harold Pollack.

In AAII’s “A Lifetime Investment Strategy,” I learned that any investment strategy should have “a clearly defined objective” and “a specified time horizon.” Seems simple enough, right?

In my introduction to this blog, my objective was to “invest in better natural energy sources and learn how to invest for an early retirement so that I can follow my parents’ example and pursue other passions.” I’m not sure about that early retirement anymore, but I definitely want to continue investing in the index ETFs I found that aren’t killing the earth (the market seems to be going up again, and I’m seeing some green arrows on my Schwab account!).

My time horizon is a bit fuzzy, given the state of the world, but I know I want to invest for the long term. Doing so means that I don’t have to constantly worry about how much my investments are making; I can just ride out the market no matter what state it’s in and know that eventually my money will make money. AAII defines the long term as “a time horizon of at least five years. No one should embark on a long-term investment strategy if they are going to need their investable assets in less than five years.” Works for me!

Other lessons from “A Lifetime Investment Strategy” include diversification to reduce risk, categories of investment strategies and the different stages of wealth accumulation.

I remember that when Pollack’s AAII Journal interview “Beyond the Index Card: Implementing the Advice of the Financial Experts” was published, some AAII members thought it was too simple. But thankfully, simple is what this blog is all about! Pollack’s strategy for getting his own finances together in his 40s could be written on an index card. To some this was much too reductive, but to me this was revolutionary!

Inspired by Pollack, here’s my investing strategy on an index card:


Now that I’m contributing to my retirement account, I want to increase that contribution along with my income. I don’t want to be too specific here, as the percentage increase in contribution will be dependent on the percentage increase in my income. Investing in sustainable companies is also a high priority for me, including whether the company itself is using and creating sustainable products and can offer sustainable investment returns.

When it comes to saving, my current budget calls for saving 20% of my income and I’d like to continue doing so. Since I have a few savings accounts now, I need rules to go along with them. My regular bank savings account is just for emergency savings, so when the balance on that account is over $10,000, the rest should be in one of my high-yield savings accounts or invested.

My credit card has been such an important addition to my personal finance arsenal, and I’ve come up with a system to pay it off twice a month whenever my paycheck comes in so that I don’t have to think too much about my balance for the rest of the month.

When I first moved out on my own, I made a deal with myself to never have a monthly rent payment that was equal to or greater than a single paycheck. I knew I wouldn’t be able to live the life I wanted if half of my income was going to just rent. So far, I’ve managed to make this work by setting hard limits on how much my rent can be when looking for future living situations.

Last but not least, my latest blog post discussed donations as an investment and why I’m passionate about them—so passionate that they made it on the index card! You’ll notice that there are some empty lines on the index card. I want to leave some room for me and my strategy to grow and change together. So whenever I feel the need to alter my strategy, if I’m ever comfortable investing in stocks, or if I ever work with a financial adviser, I can work these changes into my index card.

I hope you find this a helpful starting point for thinking about your own investing strategy and how you want to manage your finances over the rest of your lifetime! (No pressure!)