Keywords: financial goals are, major goals of financial management, how to set financial goals and achieve them, developing personal financial goals
Financial goals are targets you set to save, invest and spend your money over a certain period of time. They can be short-term like purchasing a gadget, mid-term such as paying off a debt, or long-term goals like planning for your children’s education. When you have a clear vision of your dreams, it is easier to achieve them by planning. Here, you will understand how to set financial goals and achieve them.
Why are financial goals important?
- When you define your goals, it is easier to plan for them. Developing personal financial goals can keep your expenses and savings aligned.
- Financial goals are also helpful in tracking your progress. You can keep a record of your expenses and cut off unnecessary consumption. This also makes you disciplined towards money.
- Financial planning aids you during a financial emergency. The pandemic has demonstrated the importance of financial literacy. It is vital to plan for emergency situations so that you are able to protect your loved ones in such difficult situations.
- Worrying about taxes at the last moment is not a prudent idea. So, if you begin to plan your finances on an annual basis, you will be able to assess your taxes at the beginning of the financial year.
- If you keep spending without a plan, inflation might affect you in the future, disabling you from meeting your needs. You can beat inflation and achieve your financial goals by planning your investments well in advance.
How to plan your investment?
Some of the major goals of financial management include wealth maximization, maintenance of liquidity, and estimation of your financial requirements. Now that you have understood the importance of setting your financial goals, it is essential to plan for them. Investment planning not only helps you to save money but also in generating income and growing the invested amount. Here are a few necessary steps to plan your investment:
Evaluate your current financial situation
The first step of investment planning is to assess your present finances, including your income, expenses, debt, emergency funds, etc. Creating a budget can help you determine how much you can afford to invest. If you have just started to earn, you can choose an investment tool that requires less money.
Define your financial goals
The next important step is to identify your financial goals. If you are planning to save for a vacation or starting an emergency fund, these kinds of goals are termed short-term goals. These are immediate expenses as they usually require a few months or years. On the other hand, long-term goals may take several years or even decades to be accomplished. Examples of long-term goals include starting a business, saving for children’s marriage, retirement fund, etc. Long-term goals generally require more money and attention. Another kind of financial goal is the mid-term goal. Mid-term goals require an intermediate time period. These goals include paying off debt, buying a vehicle, etc.
Prioritize your goals
Now that you have defined your financial goals, set them according to your priorities. You can start to invest according to your needs and current level of wealth.
Analyze your risk-taking ability
Determining your risk-taking appetite is a necessary step in investment planning. Young people who have just started to earn usually have lower expenses and, therefore, can take the risk. In addition, it is easier to take the risk since you have plenty of time to recover from losses. Older people usually prefer less risky and more secure investments. Riskier investments can provide higher returns but also involve significant risks; so take your time to decide.
Explore all the investment options
Once you are ready to invest, learn about all the investment options. Consider the factors such as income, budget, goals, risk tolerance, and time horizon to choose the right type of investment for you. You can invest in stocks, bonds, mutual funds and so on along with FDs and RDs too. These are a few options that most people prefer as they have the potential to balance losses.
You can also go for new-age plans like ULIP, Guaranteed Savings Plan, which are more of a long-term investment options but provide you insurance and investment opportunities together. After all, we all have a family to take care of and we don’t want to see them under stress of liabilities, if something was to happen to us.
Conclusion
Setting financial goals and planning to invest in them is vital to fulfilling your dreams and preparing for emergencies. You can increase your savings and enjoy a better standard of living with proper financial planning. Analyze the factors listed above and start planning your investment today!
