Landing upon life and financial goals are much easier said than done. It takes a lot of introspection and effort to realize what you want to achieve in life and when. Everybody wants to own a house or car but what is more important is to fix a target tenure within which you would want to own that house or car. Although in today’s times owning a house is a big achievement but owning one at the age of 30 is bigger.
Sometimes there lies a confusion in aligning and converting life goals into financial goals, here are few tips on how you can do so; check for the following things in your life goals:
- Is money involved in your goal?
There are a lot of life goals people have which do not involve money. While most of them involve money, it is important that you know the difference. If your life goal involves money, it is your financial goal. For example, buying a house or taking a sabbatical etc. For such goals and decisions, you need financial support.
- How much money is involved?
Once you are sure that your goal needs money, the next big question is how much money is needed? Different goals have a different set of requirements like if you want to buy a car then its price can be calculated instantly whereas if your goal is about retirement planning then it is going to take some calculators for you to land upon a number that too approximate. Hence, depending upon your goal and its tenure, the amount of money will be decided.
With all these goal planning comes various other factors like inflation, lifestyle changes, additional income, increasing expenses etc. you must factor-in all these regulators in order to get a realistic number at hand.
- When is the required money needed?
This is an important question given its interrelation with the amount. The amount of money required is directly proportional to tenure. The later the duration in life stage, the larger the amount is going to be. For example, retirement, child’s marriage etc.
With these much more considerable amounts, you will have to keep inversely related factors under checks like inflation and living expenses.
- Can you actually afford them and save for them?
Everybody wishes to do and get the best for their loved ones. Especially when it comes to children, the best-in-class is the first option. Everybody wants to send their children to elite schools and colleges but one needs to understand if they can really afford it.
If there is a goal which may seem out of your league but is important to you, then you will need to save substantially for it compensating and compromising at so many levels.
- Is saving enough or you need to invest?
While there may be some goals which can be realized by saving, most of them would need that extra something called investing. Wealth creation is one goal all of us have and no wealth is created by simply leaving money to sit idle in bank accounts. You will need to employ your money so that it works with you to grow. Investing serves as the bridge between your savings and your money requirements.
Choose the right type of investment to realize the best potential of investing. Equities for long-term goals and debt funds for short and mid-term. Keep some of the money in fixed return instruments like FDs as well.
Once you are sure of the goals and when you want to achieve them, you will be amazed to see how simple managing the finances can be. Be a vigilant planner and a smart investor.