We often come across the term ‘financial goals’ while investing while conversing with financial advisors, reading financial news, etc. Each one of us has certain goals to achieve in this life. Financial goals are one of them. Financial goals help us achieve a financially secure and stable future.
Whether an individual has just started earning or someone who is nearing retirement, everyone needs to have specific financial goals to ensure financial success and achieve a lifestyle that is desirable. Often, people are unclear about how to set achievable financial goals for themselves.
Here, we will discuss top tips that one can use for setting some achievable financial goals for a financially secure future. Let’s begin by understanding the importance of financial goals.
Why are financial goals important?
To achieve financial liberty and achieve your dreams, you have to go beyond being content with your current financial status. Whether it is for owning your dream home or saving sufficient finances for your retirement, you must plan ahead and this is what financial planning is all about.
At the centre of financial planning is the setting of financial goals. Financial goals help in being clear about your targets that you can look forward to achieving. With a clear target to be achieved, you can align your finances with the same.
Financial goals are important in financial planning as it helps achieve:
- Near and long-term financial success
- A realistic financial approach
- Alignment to specific time frames
- Disciplined spending approach
Expert tips to set financial goals
Financial goals cannot be the same across individuals. However, no matter how unique a financial goal, one has to adopt a meticulous approach to achieve it. Here are expert curated top tips that you can use to set achievable financial goals:
1.Check current finances
Before setting financial goals, you must check your current financial status. This will require you to calculate your net worth, which includes your current income, total asset value, and finally liabilities and debts you owe.
If you know the amount of money you have at your disposal, you can easily plan your current and near future financial goals and set up a mode to get additional income to achieve future goals.
2. Take stock of current and future priorities
While setting achievable financial goals, you must first know what is important to you. Your current age, stage of career,etc will affect your priorities and, in turn, your financial goals. For instance, if you have kids, you may want to focus on building a corpus for your child’s future. Other goals,and, such as buying a house or setting a retirement corpus, can be set by closely gauging the things that matter to you and noting them down before you proceed.
3. Prioritise your goals
You may have multiple financial goals to achieve in your life. However, not all of them can be achieved at once. While setting financial goals, you must segregate them between different time periods and priorities. There can be short-term, mid-term and long-term financial goals. By preparing a goal chart and listing all your goals, you can set specific timelines to achieve each of these goals.
4. Work with a budget
A budget for your spending and savings can help you establish and achieve your financial goals. Start with a realistic budget to bring in financial discipline such that you can manage your spending while setting aside a corpus to meet your goals. You can easily make a budget by listing all your earnings and reducing your expenses from it. After considering all the necessary expenses, you can set a limit for maximum monthly expenditure. It is important to stick to your budget to eventually meet your financial goals easily.
5. Prioritise savings
To achieve your financial goals smoothly, you must ensure to keep aside sufficient savings at all times. It is not enough to simply save a portion of your income to meet your financial goals. You must also try to figure out ways for your savings to grow. This is possible through investments.
Today, there are multiple investment avenues to choose from depending on your risk-taking ability, financial situation, preference, etc. You can also reach out to a financial advisor to figure out ways to grow your savings.
6. Focus on clearing debt
To set achievable financial goals, you must clear your existing debt situation. If you owe money, you must try to clear it as quickly and diligently as possible. While paying loan EMIs, make sure that you do not delay or miss any repayments. If your liabilities are limited, it can help to foreclose loans. Parallely, you must know how much of your income is going towards debt repayments. This way you will know how much funds you have available for your financial goals.
7. Set aside funds for emergency
While initiating the process of setting achievable financial goals, you must check if you have sufficient amount kept aside for any financial emergencies. It makes sense to create an emergency fund that is easily accessible when needed. This can be apportioned from existing savings by keeping aside some amount every month or quarter towards emergency needs. You can also reserve a lump sum amount for emergencies in a bank account, since it can be maintained in cash form. Emergency funds should only be used when really needed, else it can backfire and skew your financial planning.
8. Monitor financial progress
Keep a close track of your finances before setting your financial goals. You should know your periodic financial progress in terms of expenses, savings, investments, and overall wealth so that it is easier to re-align to your goals when needed.
To conclude, an important point to remember while setting financial goals is to aim for balance. Along with this, achievable financial goals revolve around meticulous and prudent planning using the tips mentioned above. These will make it easier for you to achieve financial success in the near and longer future.
SMART stands for specific, measurable, achievable, relevant, and timely. This strategy can be used in setting financial goals with appropriate planning.
Financial planning involves designing a path through which one can meet various life goals. It involves appropriate management of finances, including provisioning for various financial needs such that the right amount of money is available at the right time and for the right needs.
Yes, an individual can very much carry out his/her own financial planning using some basic know-how on investments, savings avenues, chalking out goals, setting emergency funds, and keeping a close watch on periodic financial status.
There is no specific amount that one should save out of total earnings. It depends on one’s income levels, age, financial goals, etc. As a general thumb rule, saving at least 10% of total earnings can ensure financial backing at all times.
Yes, including taxation is very crucial in financial planning as it takes into account the net outflow of finances. You can also plan to save on taxes with appropriate investments to reduce the total outflow.