Setting Financial Goals for Future: May the Odds Be Ever In Your Favour

Just saving money is not going to cut it, what you need is a genuine plan of action to achieve your financial goals.

Publish Date: May 02, 2019

By: Sandhya Kannan, Head – Content

Dreams, most of them come with a price tag; be it a vacation or a new car. You may have several goals, - taking a world tour, buying a house, or retiring early. All of these cost money, and you would, of course, need a nest egg, carefully calculated and put away to ensure you meet all your financial goals.

So, where do we begin? Setting financial goals is the first step as without knowing where you want to go you cannot plan how to get there.

If there is one thing we can assure you, it is that your short-term goal planning will be the first step towards achieving your long-term goals.

Short-Term Goals:

Are you in your 20’s and early 30’s? Just started making the bucks and want to live life to the fullest? Living from paycheck-to-paycheck however is not all that glorious, you’d rather also create back-up for a rainy day. This is also the time when you should have your short-term goals under the bridge.

What are short-term goals?

These could be goals you want to achieve soon, almost immediately, like paying off your credit card bill for example, your initial goal should be to be able to live on less than you earn.

How to begin short-term goal planning?

While you cannot accumulate your retirement money right away, you should start now. This can be achieved through monthly budgeting.

Sit down and take some time to put together a plan for each month - how much money you need and for which activity. The expenses can be tracked by a monthly tracker, or an excel sheet, whichever suits you.

At the end of each month, see where money is slipping through the cracks and start curbing those expenses. Finally, start with small investments rather than simply letting saved money lie in your savings account or even fixed deposits (FDs) and recurring deposits (RDs).

Read more: Calculate your retirement funds

Have a well-stocked emergency fund

Create an emergency fund, small amounts to begin with like Rs. 5000-10,000, which could help you pay for unexpected expenses. Eventually, you can expand this pool to cover more dire circumstances like unemployment or ill health. This should be your top priority!

Just imagine the possibilities— you get hit with an unexpected car repair or medical bill, you may not be able to contribute to your emergency fund and instead draw money from that pool. Feels good to have that option, doesn’t it?

Begin the ‘being debt-free’ cycle

Next is to clear off your credit card. You may not be able to expand your emergency fund right away but it is essential to clear off your credit card outstanding asap! If you leave this unattended, you pay a compounded interest, which in case of a dire situation like sudden unemployment could completely eat into your savings.

How does a short-term goal help you meet your financial goals?

This helps in clearing off the immediate financial concerns you have and renders you free to get to your long term goal requirement.

Mid Term Goals:

What are mid-term goals?

Mid-term goals would ideally mean that you’re essentially debt free and ready to move on to the next step— like getting insurance. You could ideally be in your late 30’s when you achieve your mid-term goals. This means that your party phase is ebbing and you’re probably taking life more seriously.

How to begin mid-term goal planning?

Mid-term goals are the bridge between your short-term and long-term goal planning. Start with simple investments that support your family and any eventuality you’ll may face.

Get Insurance

Start with getting Life and Health insurance. If you have a spouse or children who depend on your income, you need life insurance to provide for them in case of your premature death. Life insurance is cheap and effective. Other insurances to consider are health insurance to cover any unforeseen health cost for you and your family— this is over and above the insurance provided by your employer. In addition to conventional health insurance, also consider obtaining personal accident cover, which covers temporary and permanent disability.

Get out of debt – completely

Clear all your debts, completely--whether a personal loan, education or credit card dues, target on being free of any overheads. This helps in freeing up the cash you have and setting the long-term plans in action, faster. In case you want to retire early, this could be your first step towards it.

Start planning— to live your dream!

Want to buy a house? Or get your dream car? This is when you plan for the big things in life. It is also a good time to settle down and start saving for your children's education.

Start your investments immediately

Your dreams aren’t going to magically come to life unless you put money aside for them.
Begin with stock market investments along with a balance of some low-risk investments which work on the power of compounding. It is very important to understand your risk appetite and make a balanced portfolio with estimated returns that also consider inflation.

How does a mid-term goal help you meet your financial goals?

As we have seen so far, mid-term goals are instrumental in helping you to move from the simpler short-term goals towards long-term goals. A mid-term goal is a way to get over smaller financial matters and get involved in bigger investments which define your future and retirement.

Bonus: You must consider ending any addiction to that you may have.

Also read: Basic Concepts of Financial Risk Management

Long Term Goals:

Mid-life crisis is for real, and a financial crisis to top it could easily make life spiral out of control. It is in your 40’s that you should have your act together, especially financially. At 40, your responsibilities are much more than they were in your 20s and 30s. You need some prudent investments that can help you balance your life goals and your responsibilities.

What are long-term goals?

A long-term goal helps is all about planning your 50’s and the retirement. Usually, for most individuals, the long-term financial goal is saving enough money to retire.

How to begin long-term goal planning?

At 40, you’re at the peak of the career. You have it under control, you have disposable income which if carefully planned can be well invested in prudent instruments which, considering inflation can give you a good pool of retirement funds.

You can also use your higher income to channel a greater amount of money towards these investments.

To begin with:

Start by estimating your retirement needs— factor in higher healthcare expenses in your retirement years and retirement plans and pensions. The final amount you need will have to be funded by your investment portfolio.

Plan for an early retirement

The common rule of thumb is that you should save 10% to 15% of every salary towards your retirement. Invest this in rewarding investments, which can also help in tax-saving. By investing early for your retirement, which could be a good 20 years away, you get rewards of the power of compounding, giving more time for your money to grow, which incidentally also helps you to maintain the same lifestyle you currently have.

How does a long-term goal help you meet your financial goals?

It’s simple— A good safe retirement, where you can keep your lifestyle and live out your final vacation with a flair.

Read more: Investment Calculator

Bottom Line

We wish we could tell you that it is as simple as just following this plan. You’re going to have to put in a lot more effort and consistently follow and keep weeding.

In case something untoward happens, be prepared to create a new plan to get through that difficult period. Just make sure that you get back on track once the bad phase is over.

This is the greatest benefit of financial planning, you invest and review and in the process, you will find that every small financial effort goes into making a giant pool where the ultimate winner is only you!

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