Last updated on April 8th, 2020 at 03:41 pm
A millennial term we’ve heard of so many times, especially when one realizes that they might as well do something they’ve been contemplating for long. Since you have only one life, the fear is that if you don’t do it now, then when will you? I wish YOLO as a realization came just as easily to everyone when it comes to setting financial goals.
Every new year, people set resolutions for themselves in an attempt to become healthier, imbibe better habits or to tick off a few more things of their bucket list. If you dive deeper, in all probability, most of these resolutions will wind down to money, savings, budgeting, investing or some such results.
For example, if the aim is to lose weight by eating healthy, joining a gym or to travel to a few destinations or even to learn some new skills, in a lot of ways there’s some form of a short term investment involved for the goal to be achieved, even if it isn’t viewed that way.
Setting financial goals is a very effective way to discipline yourself about your finances. The earlier, the better so that you have sufficient time and reserves built for when you need the money.
In a very linear fashion, if you were to start thinking of financial planning soon after starting your first job, the first thing would be towards setting a savings account, saving up for higher education, a house or a car, a wedding, further family responsibilities, emergencies and then retirement. These can be easily classified into short, medium and long term goals. Financial and saving goals don’t do a lot without obtaining your first job or having any income. If you’re struggling with finding the first job, you may want to use something such as this free resume builder to help your chances of getting invited for interviews.
With the easy availability and access to experts in financial planning, today one can make informed choices about their savings and investments. The decision to do so however, is up to each individual.
Set Your Financial Goals Now
Identifying your financial goals is the first step in your planning process and there are many reasons why you should set them sooner than later. Once you know, you can consult a financial advisor to understand the time horizon to achieve each of them and therefore, plan your investments accordingly.
Some may be short or mid term goals like paying off a loan or saving for your own wedding which either have a pre-determined time period to be completed or you generally have an idea of it. Saving for a long term goal like retirement is just as vital. The earlier you start saving for your retirement, the more secure your future will be.
Whatever your financial goals may be, it’s important to understand that by starting today, you will accumulate more by the time you need it. Secure yourself by taking advantage of compounding and earning interest on interest so that money invested now will have more time to grow in the future.
Always Have An Emergency Fund
This should be a non-negotiable for every individual as noon ever knows when and how emergencies strike. There could be unforeseen circumstances such as an accident, a sudden illness, loss of job or anything as such for which a certain amount of money might be required immediately and it can help to provide security in a way till one tides over the emergency.
If preparing for a rainy day seems difficult with your income at hand, take a good look at your expenses and rejig your budget to accommodate an emergency fund. A young and newly married couple who happens to be our client was faced with an emergency when the start-up that the husband was working at shut down.
The wife having moved from a different city was still job hunting. At such a crucial time, the couple had luckily some reserve that they had created for themselves individually and were able to pool in their resources for a period of two months until they were secured with new jobs. This experience re-emphasized the importance of maintaining an emergency fund and now they consider it to be a very serious aspect of their savings.
Pay Off Your Loans Asap
Prioritize your loan payments and finish it off as soon as possible as that takes care of a liability which might be eating into your savings currently. Loan repayment could be a short or long term goal depending on how big or small the loan component is.
But the repayment can be planned well in a way that the larger payments that carry the highest interest rates can be dealt with first, while making minimum payments on the smaller ones. Paying off the high interest loan faster can potentially provide greater cost savings over time. Another approach could also be that you pay extra towards your smaller loans while making minimum payments on your larger ones.
Once the smaller loans are paid off over time, there will be fewer monthly minimum payments to make and eventually you can put more money towards the repayment of the larger ones. Consulting a financial planning advisor for your savings and investment can also help to strategize your budget allocation, dealing with important components like loan repayment.
Be Financially Independent Post Retirement Too
Working and earning is empowering as it gives you access to a lot in life. Being financially independent is not only important for that purpose but also makes you realise the value of things which you may have taken for granted for a long time, up until you started earning yourself.
But there is no guarantee that this financial independence will continue forever as you will stop working one day. By starting to save and building a corpus for retirement early in life, one can have the assurance to be financially independent even in that phase. You might be surprised to see that the latest retirement mortgage figures show that retired homeowners released more than £3.4 billion of property wealth in 2019, showing they needed money.
While subconsciously you may know what all you want to achieve and probably have a timeline in mind for it too, a powerful tool to achieve it is to write down your goals. Penning it down is a way to a clearer thought process towards achieving your goals.
A client of ours had written down a goal that he wanted to renovate his house every 10 years, another had written that he wanted a beach house to be ready a year before his retirement so that he would have it up and running by the time he would be done with his professional duties and could live there. The power of writing it down strongly maifests itself towards planning well for it and working towards its accomplishment.
Life changes and with that your financial goals too. You may expand your family even more, change jobs, move places, go through health problems or start a business. With such changes in life, financial goals will change too and will need to be reset from time to time.
Therefore, it’s important to assess your financial goals and map the progress once every six months to understand if you need to make any changes in your planning. No matter what your current financial situation looks like, you should always be setting financial goals to help guide your decision-making and influence your behavior.
After all, you only live once!