Figuring out risk
Deciding how much money you want to have and when you need it is probably pretty easy. Knowing how comfortable you are with risk might be a lot tougher if you've never thought about it or experienced it yourself.
But don't just wing it. Your risk tolerance is one of the critical ingredients in deciding what you're going to invest in. Picking investments that are riskier than you can handle can lead to some pretty ugly outcomes.
But choosing investments that aren't risky enough—that don't have the right potential for growth—can also be a roadblock in reaching your goal.
Think about risk in context
Your risk tolerance can and probably will vary depending on your goal.
If you have more time (or if your timeline isn't fixed), you have a greater ability to take risk—kind of like choosing a route you're not as familiar with.
On the other hand, if you're starting your journey a little late, you have less room for unexpected detours. In that case, you'd be better off taking a "safer" route.
As you can see, your risk tolerance, time horizon, and ultimate goal all need to work together when you're deciding what to invest in.