How To Set Financial Goal: Introduction
 Setting financial goals is very important in today’s time, However, these goals are not just for the sake of investors and business pills, but for everybody. Financial goals are relevant to any individual irrespective of his or her age or even status. Without financial planning, realizing your future aspirations can prove rather challenging. If you want to be someone who also wants to be in control of his or her finances, the first thing that one has to accomplish is setting financial targets.
What are financial goals?
Financial goals are specific objectives we set to manage our money, such as: Creating emergency fund Buying a house or a car Retirement planning children’s education fund Long-term investments and short-term saving plans These goals depend on your current financial situation and future dreams.
Importance of setting financial goals
- Financial Stability: Enacting financial objectives aids one to economize and aid in securing one’s future. It helps you cope up with your spending’s and savings.
- Motivation & Discipline: The presence of a definitive objective tends to raise your desire levels and you tend to be self-controlled. In case you differentiate short-term from long-term goals, there comes easier planning and realization.
- Risk Management: By setting financial goals, you can also handle unexpected emergencies better. For example, an emergency fund can be a goal that protects you from financial crisis.
Types of Financial Goals
Financial goals are divided into 3 main categories:
- Short-Term Goals (0-1 Year): These are the goals that need to be accomplished fast. Such as: Setting up a contingency fund Investing for the short term in fixed deposits or mutual funds Minor expenses like electronic devices or home appliances.
- Medium-Term Goals (1-5 Years): In this duration, you can achieve slightly bigger goals. Like: Saving for down payment (for house or car) Creating fund for primary education of children Planning foreign trip
- Long-Term Goals (5+ Years): These include those goals which can take more time to achieve. Like: Retirement planning Children’s higher education Large asset purchase like property or business expansion Method of setting financial goals While setting financial goals, you can use SMART technique.
The full form of SMART is:
- S – Specific: Set a clear and specific goal. E.g. “I want to accumulate a hundred thousand rupees in a year’s time.”
- M – Measurable: The said goal is quantifiable. E.g. “I’m aiming to make 1 lakh in a year, which means I am looking to save roughly 8300 every month.”
- A – Attainable: The deduced goal must be practical. E.g. “I’ll be able to keep aside 8300 every month if I cut down on expenses that are not essential.”
- R – Realistic: The goal must have some relevance to your life and life’s aspirations. E.g, “Such savings would come in handy in the times of unforeseen eventualities in the future.”
- T – Time-Laden: There should be a specific time given to accomplish the goal. E.g “I would want to pursue this aim within the span of a year.”
Strategies for Meeting Financial Targets
- Budgeting and Monitoring: In the case of accomplishing your objectives, being aware of expenses, in addition to budgeting monthly, is faster. It is a healthy practice which puts a lid on wastage of money on unnecessary items.
- Have an emergency fund: This is a goal that one has to achieve. Every person should have a minimal emergent fund which should be able to sustain them for 3-6 months of their expenditures.
- Invest Smartly: Investments like mutual funds, shares, fixed deposits, and gold purchases should be spread out. Even though investments are not a very tempting activity, they do enable goals to be achieved through wealth creation over time.
- Cut Down Expenses on Borrowing Money: If loans, credit cards or any types of debts are in possession, then it is better to pay them off, especially the high priority ones such as consumer debts or loans. Concentrate on the debts that bear minimal interest and gradually begin to lessen the load.
- Constantly Monitor and Fine-tune: Perform monitoring of financial targets on a regular basis. Qualifying changes in targets is necessary, based on changes in the environment or within the individual himself.
Typical Situations That You Should Not Get Into
- The Absence of an Emergency Fund: Quite a number of persons tend to take the emergency fund for granted, this is unwise. The emergency fund is best viewed as the first financial goal.
- Careless Expenditure: Engaging in non-productive expenditure may hamper your financial plans. Plan your expenditures with emphasis on making savings.
- Failure to Prepare: Goals can be achieved only when there is a prior prepare. However, if you lack clarity you can seek assistance from a financial planner or advisor.
- Do Not Assume that You Can Work and Not Think about Retirement: One of the most vital stages of your life is planning for retirement and it is prudent to start now.
Conclusion
Establishing and meeting financial objectives enhances order and sense of direction in one’s life. It is recommended that you use a SMART objective methodology in setting financial goals and monitor them at regular intervals. Financial planning is not an event but a process and one can amend the process in accordance with their objectives.
Hence, do establish your financial objectives today and make your wishes come true!