The first step towards achieving financial freedom is to set small realistic financial goals and then prepare a fool proof plan to achieve those goals. Setting your financial goals puts you in charge of your money and your life. Your goals could be big or small, long term or short term, but with a clear set of goals in mind, things become more easily achievable with the help of financial planners who can give you a plethora of options to choose from. If you are married, it is very important that you and your spouse both share the same financial goals, irrespective of who contributes how much to the investment. Otherwise, achieving your personal financial goals will just not be possible. It is a good idea to decide your financial goals together, and review your progress together from time to time so as to make sure both of you are contributing to the same goals. Prioritise each of your personal financial goals in order of their importance, and then determine how long you have to save for each of them.
When you have your first child the first thing you would want is financial security, followed by the child’s elementary and secondary education. This is followed by the child’s higher education etc. But the goal has to be set much in advance before the child is born. Goal setting and devising a plan to take care of that goal is very important. For this you need to invest early to reap the benefits of compounded returns over a period of time. Your retirement could be many years away, but your short-term goals could begin in a year or two post your marriage. While capital gains are never guaranteed, you can use an estimated annual growth rate returns calculator for these purposes.
Goal Planning must be done with a rational mindset wherein you must figure out how much you’ll need to save per month to achieve your financial goals. Don’t be discouraged if the amount required to fulfill a particular goal or all your financial goals is huge. The important thing is to have a set of tangible financial goals to work toward. On a monthly or quarterly basis, you and your spouse should review your progress, and continue to refine your plan.
When it comes to investing, it’s often best to take a long-term, disciplined approach. In the short term, markets can be volatile, and it is often tempting to switch strategies and investments as a knee-jerk reaction to the latest catastrophic news story. This is not a good approach to investing, and it has been shown that investors who remain fully invested over the long-term average better than those who do not.
Two things to consider while setting a goal
- Figure out what matters to you
- Prioritize & Quantify your goal(s)
Five things to do to fulfill your goals
- Create a realistic budget to meet that goal
- Create a well stocked emergency fund as an alternative
- Create Multiple Income streams and diversify your asset allocation
- Insure the health and lives of your loved ones
- Stay away from unnecessary debts like Loans and mortgages
The Bottom Line
As a beginner you might not make a perfectly quick progress towards achieving any of your goals, but the important thing is to be consistent and not necessarily be perfect. If you get hit with an unexpected major repair at your house or an emergency medical bill in a particular month and can’t contribute to your emergency fund during that month, but have to take money out of it instead, don’t worry and get yourself tensed about it. That is precisely why the Emergency fund is there for. Just get back on track as soon as you can!
The same is true if you lose your job or when there is a global financial crisis. You’ll have to create a new plan to get through that difficult period, and you may not be able to pay down debt or save for retirement during that time, but you can resume your original plan – or perhaps a revised version – once you come out on the other side.
That’s the beauty of Goal Planning. You and your spouse can review and update your goals and monitor your progress in reaching them throughout life’s ups and downs. In the process, you will find that both the small things you do on a daily and monthly basis and the large things you do every year and over the decades will help you achieve your desired financial goals.