SETTING FINANCIAL GOALS
Listing all that one aims for with how much to save and invest every month towards each target makes it easy to track the progress
We are all unique and so are our financial goals. One should not confuse the similar desires that many of us may have— owning a house, buying a car, saving for children’s education and more—with having the same financial goals. As none of us have the same bills, rent, debts or lifestyle, we need a plan that will address our specific circumstances and not that of our neighbour’s. Aiming for a financial goal involves saving and investing money to realise that goal.
Step 1: List your financial goals and categorise them based on a timeline as short-, medium- or long-term.
Step 2: Put in the target sum you need for each goal and the number of years you have to achieve them.
Step 3: You could look up the many online financial goal calculators to work backwards on how much you need to save each month towards each goal from now to get to the target. You could work on this with the expected returns you foresee for each goal. The farther the goals, the higher the returns.
Creating a list of financial goals is vital, as having a clear picture of what you are aiming for makes working towards your target easy to track. It is a good habit to set your goals so that they are measurable, realistic, timeoriented and specific.
Typically, goals that are within a year to 18 months could be short-term in nature, those that are up to 3-5 years are medium-term and anything longer than that could be slotted as a long-term financial goal. Financial goals could also be listed based on priorities; for instance, the goal to save money for children’s education is higher on priority compared to, say, a vacation.
➘ HOW MUCH TO SAVE?
We all have a monthly income, monthly rents, monthly expenses, so why not monthly savings and investments towards each financial goal? The mutual fund SIP (systematic investment plan) is a phenomenon that has transformed the way one saves and invests. With this analogy and with the help of online tools, one can arrive at the sum needed each month to target each financial goal. This works in a two-pronged way—you regularly save towards each financial goal and you get to track the progress made by your savings towards each of the goals (see SIPs to achieve financial goals).
By following the approach of setting a financial goal and then working on the money you need to save towards it, your goals appear to be achievable and it helps you save specifically for each financial goal. By staying on top of your financial goals, you will be motivated to work on them and be disciplined with your savings to achieve them in time. ■