Map Out a Route to Reach Your Financial Aims in 5 Easy Stages:
Goal Chasing in the Financial World: A Step-by-Step Guide
Perhaps you dream about sipping cocktails on tropical beaches or cruising in a luxury car, but vita minima people hold themselves back, assuming their aspirations are too outlandish. Don’t let that be you! Here's a practical guide to turning your dreams into achievable financial goals.
Step 1: Decide What Makes You Tick
Life is diverse, and so are our desires. Some dreams are commonly shared, such as a comfy retirement. If you have a unique goal like investing in a unique business venture, remember to factor in additional costs like startup capital. Setting relevant goals will motivate you to consistently strive towards them.
Step 2: Be Detailed and Direct
When you declare, "I want to save for my child's education," or "I want to save for a car," you're merely sketching the outlines of your plans. To create a solid financial goal, you must be precise. Instead, you can say, "I want to save $1 crore for my child's education," or "I want to save $12 lakh for a car." Having a definite aim gives you a head start.
For example, let's consider a popular degree course at Yale University, which currently costs $75 lakh. As the educational sector's inflation rate can be estimated, you can make an educated guess about the future cost for when your child is ready to attend college.
Step 3: Stay Grounded but Ambitious
Striving to participate in the Mumbai Marathon's full marathon (42 km) may be a fantastic aspiration, yet for many, the physical demands might prove too taxing. A more realistic target could be a 10 km or even 21 km race. Similarly, be aware of your financial capabilities when setting your goals; a sea-facing bungalow in Mumbai may be a desirable objective, but it might be excessively costly if you're not investing wisely and spending prudently.
Step 4: Assign Deadlines
Align your goals with sensible deadlines to maintain momentum and avoid procrastination. Retirement and children's education usually have set timelines. However, for goals like purchasing a house or a car, you have the freedom to determine the deadlines – just ensure they are reasonable. Be mindful not to set unrealistic targets that drain your motivation. For instance, aspiring to own a BMW in 3 years might be overly ambitious if you're not making substantial contributions to your savings.
Step 5: Invest Wisely
Making the right investment decisions is crucial and typically where many fall short. As a country, we tend to flock to fixed-income products. Although these are safe, the returns are modest, and there's often a tax burden.
Here's a smarter approach:- Equity Mutual Funds: Suitable for long-term goals, as they offer higher growth potential but with higher risk. Assess your risk tolerance and timeline before deciding.- Debt Mutual Funds: Great for short-to-medium term goals; they balance stability and lower risk.- Aggressive Hybrid Mutual Funds: Ideal for medium-to-long term goals, offering a blend of equity growth and debt cushion to balance risks and returns.
With a well-thought-out financial plan, you'll sail towards your dreams while staying financially balanced.
- For the long-term goal of funding your child's education at a prestigious university, consider investing in aggressive hybrid mutual funds, which balance high growth potential with some level of risk.
- To achieve the short-term goal of saving for a car, consider investing in liquid funds, which offer stability and lower risk over shorter investment periods.
- As you plan for a personal-finance goal like retirement, diversify your investments, including mutual funds, to ensure financial balance and growth. Keep in mind that finance is not just about investing but also about spending prudently.
