Setting up financial goals is a way to take charge of your finance and your life. You can make short term, long term and life time goals. This will help you buy that car you want, save up for family vacations, give your children quality education and still have enough for your retirement. Setting a financial goal and sticking to it will help you achieve this. Financial goals will help your prioritise and put things in perspective so you can spend and save according to your current and future needs.
Here are few steps on how to set up these goals:
What’s Important?
Decide what is important to you and what you want. While you will want to have substantial money to live comfortably in your senior years, at the same time you may also want to go for a vacation every year. Perhaps for a short term goal your heart is set on buying the IPhone 5, but will it take your resources away from critical savings that will help you gain something more in the future? Honestly evaluate what your priorities are and what you want from life.
How much do you need?
Once you have your priorities in order, it is time to evaluate the costs. Figure out how much the life insurance would cost or how much you would need to save to live a comfortable life in your senior years. Find out how much your vacations, your IPhone 5 and other things you thing you need would cost. Total the cost of these priorities.
Debts
Be it your credit card debt or a loan debt, it is important that paying off debts is one of your goals.
Income
Discover how much income your make, not only from that monthly salary, but any stocks, insurances, equity funds and others.
Get Real
Once you have found out your costs and your income, it’s time to get real. The goal you may have set may be too high to achieve and may not fit into your budget. Either you try to aim for a higher income or you start trimming your expenses. Trimming does not mean that you throw away the goal. Instead, you just have to rearrange your priorities. Some goals will have to take a backseat, until you get a better job or a better source of income. For example, buying an IPhone 5 may drain funds from your plan of creating a savings account. This will allow you to create a final list of what your goals are based on their priority.
Stick to your Goals
Now that you have set your goals, you need to stick to it. Make an action plan so that you can achieve all of your goals. Create a savings account if you want to save money for your senior years. Plan an EMI payment option to buy that IPhone 5. Decide what the best action plan is for you!
Review
Lastly, it is of great importance that you always review your financial goals and your action plan. You, as a human being, are constantly evolving your needs and wants. A review would also help you map out what you have managed to achieve and what you are failing at.
