Keywords: Planning financial goals, objectives of financial planning, financial planning includes, how to plan financial goals
The pandemic devastated numerous lives and presented an unprecedented challenge to public health, food security, and employment issues on a global level. It had severe effects on people’s physical health, mental health, and also financial well-being. The most vulnerable ones had to suffer the most.
As they say, “Every cloud has a silver lining”, and the only positive part of this pandemic was the lessons we all learned. It demonstrated the importance of financial planning in India. Planning financial goals is essential not only to fulfill your dreams but also to be prepared for financial emergencies. If you live without planning your financial goals, you are likely to spend more than required.
You might even come up short when you need to pay unexpected bills, not to mention during a medical emergency or your retirement. Keep reading to understand the objectives of financial planning and how to plan finance goals.
What are financial goals?
Financial goals are the goals you set to manage your money. Financial planning includes earning, spending, saving, and also the investment of your income. Financial goals are driven by specific financial needs of the future over a particular period of time. Buying a gadget, starting an emergency fund, paying off debt, saving for children’s education, etc., are all examples of financial goals.
Financial goals can be divided into three types:
Short-term goals
A short-term goal is an objective that can be achieved in a few months. They are usually accomplished in the near future. For example, saving for a vacation, starting an emergency fund, purchasing a gadget, etc. Some short-term financial goals are small milestones that help you to reach long-term goals.
Mid-term goals
Mid-term goals are intermediate goals as they take a longer time than short-term goals but a shorter time period than long-term goals. It may take from a few months to a few years to achieve mid-term goals. Saving for your marriage, saving for a new house, or renovating your current home, starting a new business, etc., are categorized as mid-term goals.
Long-term goals
Long-term goals are the financial objectives in the distant future and usually take ten years or more to accomplish. Some common long-term goals are a retirement fund, saving money for children’s education or marriage, paying off a mortgage, etc
Why is financial planning important?
1. When you have defined your financial goals, it is easier to make a realistic plan to fulfill your dreams.
2. If you have a clear vision of your objectives, you do not spend extra and hence save more to achieve your goals.
3. Inflation is the biggest enemy of your wealth. If you have a plan, you can start investing and put your money to work. This way, you can increase the value of your savings, beating inflation.
4. Financial planning aids you in tracking your finances on an annual basis. You can assess your budget, expenses and also taxes.
How to plan financial goals?
Now that you have understood what planning financial goals means, and the objectives of financial planning, you must be wondering how to plan financial goals? You can follow these simple steps to create a unique financial plan for yourself:
1. Analyze your current financial circumstances. This can be done by observing your budget, income, and expenses. It helps you to cut off unnecessary expenses, save more, and work towards your financial plans.
2. You have to define your financial goals in order to get a distinct vision. Categorize the financial goals into short-term goals, mid-term goals, and long-term goals.
3. Prioritize these goals according to your requirements and budget. (You can segregate the goals on the basis of need, want, or critical).
4. Explore all the investment vehicles and start to invest in a tool that is suitable for you. There are numerous options available in the financial market, such as stocks, bonds, derivatives, fixed deposits, etc. Choose an savings plan that best suits your budget, target, and risk-taking appetite.
To wrap up, planning financial goals is a pivotal pillar in today’s world. Financial goals can be defined, worked upon, and accomplished with a customized plan. You can consider the factors like income, budget, and targets and design a unique plan for yourself. So, start planning financial goals today to have a better tomorrow!
