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Setting financial goals is one of the most important steps to achieve financial stability. Unless you do not have anything specific to work upon, you will mostly end up spending more than you should. Check out this post to know six simple tips that can help you set concrete financial goals.
There is a widespread myth in India thatfinancial planning and setting financial goals are only for people in a particular age or income bracket. Every individual aiming to live a financially secure life needs to set well-defined, concrete goals and work towards them from an early age to be better prepared to achieve them.
But while we all want to achieve a lot to different things in life, how to set financial goals correctly is something that most people don't know about. Here are six tips that can help you set goals for your future:
1. Work on a budget
It is essential to know where you currently are to understand where you want to go. When it comes to goal planning, this means creating a budget. When you create a budget for your monthly expenses, you will see how much money is getting slipped through the cracks every month. This will allow you to know the areas where you can save money. This money can be put to good use to help you get closer to your objectives.
2. Know what is important to you
Once you know your monthly expenses, the next step is to understand your financial goals. Know what matters to you and what type of life you would like to live in the future. For most people, the common financial objectives are buying a car, a new home, savings for a child's education and marriage, and retirement planning.
Once you know your goals, prioritise them in the order in which you would like to achieve them. This will enable you to work out a plan specific to goals.
3. Categorise and break down the objectives
After prioritising your objectives, categorise them in short-term, medium-term and long-term goals. With the rising cost of living, saving is not adequate anymore. You need to save and invest your money if you want to meet your objectives successfully.
Categorising the goals will help you select investment options that best suit a particular time frame. You can also break down the objectives into smaller mini-goals to further strengthen your goal planning.
4. Create a separate Savings Account
If you want to be a smart financial goal planner, create a separate bank account solely for depositing your savings and investing after the goals are categorised and prioritised. Even if you are not able to save a lot of money currently, start with a small amount.
If possible, try to automate deposits of a fixed amount every month into this account, so that you do not have to test your memory and willpower to stay on track. You can also create an emergency fund for managing your emergency expenses, so that you don’t have to withdraw money from this Savings Account.
5. Invest smartly
You will often come across experts suggesting people to select investment options as per their personal profile. This means that you should select an investment that is in line with your objectives, time frame, age, risk appetite and investment style.
If you are confused with all the different types of investment options, you can also consider taking professional help. Now there are online personal finance management platforms also that can guide you on your financial health and help you achieve your objectives.
6. Track your progress
After investing, it is also essential to regularly check the progress to make sure that you stay on track. Utilise your funds in the best way possible and make changes to your portfolio only when required.
Most investment options take time to deliver considerable returns. As long as you have selected a reliable instrument, be patient and give some time to the investment to deliver returns.
Financial goals done right
Many people, especially salaried employees, are now getting financially aware and understanding the importance of saving and investing.
If you want to set financial objectives that are well-defined and concrete, follow the above steps and be rest assured that the results would be outstanding.
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