Financial success requires thought and planning. Setting financial goals in advance will help you to define where you want to go and how you are going to achieve it.
If you do not have a clear view on your financial goals, then your aim is very less likely to be achieved.
There are three major types of financial goals:
- near-term or short term,
- Mid-term or intermediate term, and
- long term
By defining your own long-term, short-term and mid-term financial goals, you can easily know how to organize things and start saving more money to achieve it.
To get started, ask yourself following questions;
- what are my priorities.
- how much money do I need to achieve these priorities. and
- What is the time frame within which i have to achive my target.
Try to divide your priorities by putting them into short-term, mid-term and long-term list.
Preparing an excel sheet with columns like goals to achieve, funds required, monthly saving to achieve your fund’s requirements and additional funding if possible can be a great help. By doing this you can have an idea to know whether it’s difficult or easier to achieve.
Short Term Financial Goals
A short-term goal is one that can be reached in a year or less. In this list, you have to include those financial goals that can be easily accessible within next year.
To achieve your target on a short term, you can put your money in a saving account or invest in equity market or mutual fund or recurring deposit account.
Example of Short term financial goals;
- Building an Emergency Fund to take care of unexpected expenses.
- Pay Off Credit Card or Medical Bills.
Mid-term financial goals
In mid-term list, you can keep those goals that are required to be achieved in 2-5 years. You can put funds into fixed deposits, recurring deposits, SIP schemes, real-estate, KVP and NSC.
When you achieve your target of raising funds, we suggest you to take out that amount and keep it in a separate saving account, which you can withdraw at the time of requirements.
Example of medium-term financial goals;
- Saving enough to buy a new car.
- buying your own house
Long-term financial goals
In long-term financial goals, you need to keep savings for more than 5 years for those targets which you want to achieve after 5 years from now.
Examples of long-term financial goals;
- Saving enough to pay for your children’s college education and/or marriage
- Retirement living.
For these kinds of goals, you need to first define your risk taking capacity. If you are a less risk taker, then we suggest you to invest in a public provident fund or PPF scheme or endowment life insurance policy. If possible, we suggest you to start investing in real-estate.
If you are high risk taker, then in addition to these investment options you can try investing in mutual funds or stock market.
Based on your financial goals and obligations, you need to set aside certain amount each month in a good investment scheme to help you reach your target. If it’s not possible to achieve with your present income then try cutting down certain unnecessary expenses or try to earn more by diversifying your income streams.
Please remember, setting financial goals is the first step towards financial success. To achieve financial success, you need to have a proper plan of action.
We suggest you to revisit your financial goals on a more consistent basis with a workable plan to bring them to reality.