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Learn all about Financial Goals, how to set and achieve S.M.A.R.T. goals and how to create a good strategy step by step.
What are your life goals? Are you looking to achieve financial goals such as buying a new car, owning your own house or ensuring your children get into a good college?
Or maybe a world tour? No matter your age or goal, we've all tried to save money for something that's currently financially out of reach.
Isn't it? Hence, planning for your financial future, regardless of your goals or income, is always a good idea. These financial advices from the richest in the world will help you in this journey.
Before planning, you must first establish a clear financial goal. What you want? How much time will it take?
What are the steps to get there? You need to set out a smart and achievable plan for each goal.
But let's start with the basics first.
What Are Financial Goals?
Financial goals are money related ambitions that you desire to achieve, like earning six figures per year or saving Rs 10,000 per month.
Or on the other hand, they can be financial objectives, such as purchasing a beach house or funding your dream vacation to Bali.
Your aim is basically represented by a monetary target. You can achieve two types of goals:
Short-term goals : Short-term goals are those which you want to accomplish in the next year or less.
Here are a few examples of short-term financial goals:
- Buying a new phone.
- Take your family to Thailand for a vacation.
- Getting a credit card paid off.
- Invest in an emergency fund.
- Get a bicycle.
Long-term goals: Long-term goals need one to take a step back and look at the big picture.
They can range from goals you want to achieve in the next 2 years to goals you want to reach in the next 50 years.
Here are a few examples of long-term financial goals:
- Create and run a thriving small business.
- Invest in a vacation home.
- Pay for your children's college education without taking out a loan.
- Live comfortably after retirement.
Now remember, when it comes to goal-setting, having a mix of short and long-term goals is always better.
It's difficult to keep working every day towards a goal that's 30 years away.
Right? But if you're following a well-thought-out strategy that includes weekly, monthly, and long-term goals, you'll reap rewards along the way that will motivate you to keep going. Makes sense?
How to Set and Achieve Financial Goals
Take some time to jot down things you want to accomplish in life when it comes to financial goals.
Don't be stingy with your words! Start big and work your way down to smaller goals.
SMART goals are a wonderful foundation to employ when building a financial strategy.
It stands for specific, measurable, achievable, relevant, and time-bound goals.
You can make it easy by asking yourself a few important questions.
1. What am I Looking For? Set focused & tangible financial goals.
You can't get what you want unless you know what you want. Make a list of all your ambitions, from basic necessities — like a new car to true splurges, like a luxurious vacation home. Make your request as specific as possible.
If it's a car, for instance, make a note of the brand and model. Create the list with your spouse if you're married so you can work towards your objectives together.
Retirement savings should be on everyone's to-do list; the sooner you start, the better your prospects of growing.
You might be wondering why the mechanical act of creating financial objectives is so crucial. You can be thinking something without recognising it.
Because it is intangible, you cannot properly identify it in your mind.
When you try to put that thought/notion into words and explain it, something remarkable happens.
That abstract notion now has a body, shape, form, and substance thanks to the written word. It's no longer just a musing.
It becomes something that stimulates you or gives you a gut reaction.
When you write your dream down, it becomes a goal. Let's say you want to buy a house. You often fantasise about it.
However, as soon as you begin putting it down, your mind will begin to wonder, "When, where, how many square feet, how many bedrooms?"
This writing clarifies your aim and forces your thoughts to think of solutions to attain it.
2. What is Most Important for Me? Prioritize Financial goals.
It's likely that you have a big list of objectives, and achieving them all at once would be practically impossible.
To begin, prioritise the short- and long-term objectives that are most essential to you right now.
The wedding of your daughter would be more important to you than the overseas trip. Purchasing a house is more significant than purchasing a farm.
Don't abandon goals that aren't on your priority list, though. Instead, wait six months or a year before returning to them.
You may have accomplished some of your initial objectives or received a raise by then, allowing you to begin working on others.
3. When Do I Want It? Set a time frame for your financial goals
Divide your priority goals. One into those you want to or can accomplish right away and those that will take a bit longer.
Then give each one a deadline so you can figure out how much you need to save each month.
In every situation, the amount of money you save each month will be determined by how quickly you'll need it.
If you want a car in a year, you'll need to save more each month; if you can wait two years, you'll need to save less.
Even if it's a top goal, college money for your children is something you'll likely build over time, but don't put it off or you'll find you'll need it sooner than you expect.
Setting milestones for your goals, particularly those with a higher price tag, might help them feel more attainable.
Consider this: saving Rs 10 lakhs may seem difficult, yet saving Rs 10 thousand every month is completely feasible.
The important thing is to find a method that works for you.
4. How Much Will It Cost? How Much do I Need to Save?
Write down your best guess for each objective, including when you'd like to achieve it and how much you'll need to save each month to get there.
If you want to save for your daughter's wedding, which is 10 years away, you'll need to first figure out how much the wedding will cost in today's pricing.
Then you must account for ten years of inflation. You now know how much your target is worth in the future.
Another example - will setting aside Rs 10000 or Rs 20000 per month cover a down payment for a car in two years?
It can be difficult to predict how much a significant purchase like a new home will cost a few years down the road, or how much college tuition for your children will cost a decade or more in the future, so it's better to estimate how much you can manage to save now and get started.
You might only be able to contribute a small amount at first. However, as your salary/promotion/income rises year after year, you can increase your contribution. Whatever you collect will come in helpful when the time comes. .
Discover how developing savings as a habit is now easy & awarding.
5. Does the Goal need a Deadline?
Setting a deadline for your financial goals may appear to be a bad idea. How do I know when I'll be able to buy my house and when my daughter's wedding will be?
However, if you don't address it, you won't be financially prepared for it. You will not have any financial concerns if you are financially prepared and the target event does not take place at that time and is postponed for various reasons.
You will be financially prepared from then on, with enough money to meet your goals.
Setting a deadline will psychologically motivate you to achieve your goal. In addition, as soon as you set a deadline, your mind begins counting down.
You won't be able to build a financial strategy until you know how many years from now you want to attain your goal. Don't you agree?
6. What Are the Steps to Making Your Dreams Come True?
Now that you've put down your dreams, it's time to make a plan to make them a reality. You'll need to find out how much each of your objectives will cost, which will need some study and basic math.
Based on your income and expenses, you'll need to piece together a plan for when and how you'll meet each goal.
You should also set a budget for your savings now that you know exactly how much to save for each objective.
If you do this year after year, all of your financial aspirations will become a reality.
Anyone who is prepared to put in the time and effort for setting and achieving goals can live a debt-free existence.
All you need is dedication and good strategy. Use the advice above to get started on your financial goals-setting journey.
Need a guide on Personal Finance? Check out why financial planning is required for a successful and financially secure future.