You work too hard. But for what? Did you ever face a point where you have no idea of a bank account balance, falling short for the next expense and how did it happen? The answer is your goal setting. We all have some life goals, but do we plan it financially? Here comes into the picture financial goals. Today we are going to learn everything about setting right financial goals considering all important elements.
Financial goals are not only important for businesses, but also for individuals. Right fund allocation plays a very important role in balanced finance in achieving goals. Financial goals can be unique for every individual, but we will consider a general outline to set them.
SMART and motivating goals
If you don’t have any financial goal, you probably are planning to fail. The goals should first be motivated to achieve your life dreams, to keep you going. But they also should be SMART. To set SMART goals, ask yourself following:
Inflation should mainly be considered for long term goals. One thing that costs for some amount will not be available for the same amount after some years. For example, if a house costs 50 less now, after 10 years, it won’t be available for the same amount. So for long term goals, the cost should be considered of the actual purchase time.
Once goals are defined, the next step is to consider other expenses which might come in between as hurdles in achieving goals. These expenses are usually unexpected and unavoidable. Following steps can be taken to deal with them:
Mediclaim and insurances: Unfortunate accidents can occur anytime. Such incidents can suddenly damage your plan. The best ways to avoid are mediclaims and insurances may it be for yourself, family members, or valuable assets. Make sure they are suitable for you.
Emergency funds: In today’s fragile market, jobs and income are not constant and secure. Hence at least 3-6 months basic expenses should be kept as an emergency fund in liquid.
Savings: You might have other family responsibilities and occasions when you might have to spend. Save for it.
Now consider your monthly budget for fund allocation. Consider monthly income, expenses and then allot funds. Bring on calculators, planners. Here, it is very important to consider the span of the goal if they are short term, mid term or long term. So that the amount can be calculated to allot monthly. The plan outline would be as follows.
|Goal(Specific)||Cost of purchase(Measurable)||Term(Timely)||Monthly budget(Realistic)||How to do it- the path(action)|
|Emergency fund||60,000||12 months||5,000||Saving|
Do you feel it’s too much to achieve? Not really!! You still can do it!! Consider following points to rethink
Increase in your income: With time and experience the income increases. Also, goals can motivate you to acquire more skills, expertise, use time wisely and increase income. This can majorly help you for that difference.
Reduce expense: Check your card statements and categorize monthly expenses. You might be surprised to find those extra avoidable or reducible expenses to help you contribute in reducing the difference.
Pay off debts: Credit cards and EMIs seem to be big savers. But have you considered the interests? If debts are paid on time, not only it will save those extra interests and charges, but also increase credit score for actual emergencies.
Compounding: If inflation has given scratch on the goals, compounding would heal the wound. Money can make more and goals would seem to be achievable now. Don’t only save for goals, but invest and see the magic of compounding for mid and long term goals.
Right investment: Investing at the right time in the right option can work as an extra income source. Check risk and span in the option and your risk appetite before investing.
If you have started planning and stick to take steps for your financial goals, you are halfway done. But if you still find it complicated, you should take advice from professional experts.