How should you plan your Financial Goals?

“The tragedy in life doesn’t lie in not reaching your goal. The tragedy lies in having no goal to reach.” – Benjamin Mays

When we talk about goals we talk about achieving a target. The target can be the crossing the finish line for an athlete or passing out with flying colors for a student or achieving the top medical college for an aspiring doctor. Every individual has a different approach to achieve these goals. All goals are different and all people have different goals. Today let us talk about a few financial goals.

So what are financial goals? Any goal that needs to be achieved financially viz. goals to be achieved by paying out money, in short or long term are known as a financial goals. Let us take a few examples and discuss these financial goals.

Short term goals: Goals to be achieved in less than a year are short term goals. An emergency like a family member undergoing an operation can be termed as a short term goal, as this goal requires appropriate cash in a very short period. Purchasing a motor vehicle now or marriage fixed at the end of the year or a small trip to native place can also be defined as a short term goal. To meet a short term goals you need to invest in liquid instruments like short term fixed deposits with the bank, or liquid mutual funds, or have ideal cash in your savings account.

Medium term goals: Goals to be achieved after a year but before 5 years can be termed as medium term goals. Goals like purchase of a house or house renovation after 2-3 years can be termed as a medium term goal. For a self employed person, expansion of business after two years can also be considered a medium term goal. In case of purchasing a car, you can make full payment instead of opting for a loan and making payments via easy monthly instalments. This helps in minimising liabilities and over-burdening yourself with a fixed outflow each month. Medium term goals generally require a disciplined investment plan in a mix of equity and debt investments (Read asset allocation for different equity and debt investment options) that can be liquidated when required.

Long term goals: Goals that are recurring in nature can be considered as long term goals. For a newly married couple, planning for child’s education and marriage expenses or for a family in their early thirties, planning for retirement living expenses can be considered as long term goals. You can invest predominantly in equity investments to achieve long term goals as equity as an asset class provides best returns over a long term horizon of 10 to 15 years.

Many of us don’t realise these financial goals and fail to plan for the same. A systematic and a disciplined approach towards investing helps in achieving all financial goals.

Put your future in good hands – your own.

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