What are financial goals?
Financial Goals are the objectives you take to save or invest your hard-earned money. These goals can be the things you want to achieve in the short term, medium term or long term.Why is setting financial goals important?
Setting short-term, mid-term and long-term financial goals is an important step toward becoming financially secure. If you don’t have any specific financial goal to work on, you’re likely to spend more than you should. Later, when you get unexpected bills, you might get stuck into the vicious cycle of credits and loans. Eventually, you feel like you never had enough cash to save! Hence, having financial goals are very important.1. Emergency fund to fall back on
No matter if you are in your 20s or 40s, you would need emergency funds at every stage of your life. Having enough emergency funds takes away a lot of worries as you know you have funds in case of need. It also acts as a wonderful way of managing your money. So, How much emergency funds should you have? Your emergency fund should be at least three to six times your current income. These funds would help you tackle unexpected events such as job loss, a health emergency and so on. If you have yet not started creating this fund, you can simply start with a mutual fund SIP as it will give you dual benefits of saving + investing.2. Get Yourself a Health and Life Insurance.
As you lead towards your 40s, your obligations multiply drastically. Also, you want your family to be safe and secure without any financial burden. In order to do so, you need to pay attention to your life and health insurance needs. A life insurance policy will provide you and your family with much-needed financial protection in case of an emergency. Health insurance is to help you deal with medical issues that make hospitalizations and costly treatment of critical illnesses less challenging. Also, if you are in your 20s or 30s you can get these insurance covers at comparatively lower costs as you are still young.3. Retirement Planning
You normally might not think of retirement planning in your 20s and 30s. However, you can’t afford to delay it further as you approach your 40s. Time plays an important factor when it comes to long term investing - The more you delay, the harder it gets to achieve your goal. Hence, you must start your retirement planning in your 30s itself. How would you evaluate the amount required for retirement planning? The retirement corpus you will need in your 60s should be, Retirement corpus = The costs of your current lifestyle + expected inflation. While in your 30s, you should already have some money locked in long term investments such as PPF, NPS, blue-chip mutual funds, etc. The invested money would continue to grow quickly with time, providing you with the financial relief you will need in your golden years.4. Create multiple sources of income
In today’s world creating multiple sources of income is very essential. If you have read the book ‘Rich Dad, Poor Dad’ you will realize the importance of having multiple sources of income. If someday your main source of income is stopped due to some reasons, you can still rely on the other sources of income you have. Your second source of income does not need to be a huge one. A simple mutual fund or a SmartSIP would get the job done. Small investments today can lead you towards a very financially sound future.5. Get comfortable with investing
Investing ensures that your present and future are stable and secure for the long-term. The money generated from your investments can provide financial security and income in your later years. Hence, it is said that - the early you start investing, the better! But, you don’t wake up and start investing just like that. You would need a SMART goal based financial plan. S- Specific M- Measurable A- Achievable R- Relevant T- Time bound For example: I want to open a restaurant in 5 years from now. Hence, I’ll invest my Rs 20,000 per month in Growth funds. Also, you don’t need a huge corpus to start investing. You can start investing with discipline in mutual funds and eventually, it would lead you towards your goal.
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- A financial goal such as tax saving, retirement planning, child education or
- A goal as per time horizon such as 1 crore in 10 years or 1 crore 15 years or
- A goal as per the risk taking ability of an investor.
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