What are financial goals and how to define, set and achieve Financial goals?

Everyone has some goals in life but can all the goals be financial goals? I want to be rich or I want to go on a vacation or buy a house. All these look like financial goals but they aren’t. So what are financial goals?

What are financial goals for millennials or Gen Y or Gen Z?

Financial goals are the goals that revolve around finances and money. They are targets set to achieve future financial needs. Financial goals are defined in terms of numbers. Also, they have a specific tenure attached to them and a specific amount to be achieved. Financial goals and needs differ from person to person. While the financial goal for a millennial is to look for stability in life, the financial goal for a Gen Z might involve planning for an immediate big purchase.

Usual statements do not qualify as financial goals. For example, I want to be rich or I want to go on a vacation or I want to buy a house do not qualify as financial goals. I want to earn Rs 1 crore in 5 years or I want to go on a vacation in 3 years or I want to buy a house in 5 years are financial goals. Read about whether you should buy a house or rent one.

Having a time period attached to it and knowing how much you want is very important. That’s when a goal can be called a financial goal. A few examples of financial goals are to build a home in 5 years, buy a car in 3 years, save up for a kid’s education or marriage in 10 years, build an emergency fund, save up for retirement, etc are all financial goals.

How to set financial goals?

Financial planning is helpful for people at different stages of their life. Just because a person isn’t married or has no family doesn’t mean they do not plan for a financially secured future. Until the person starts earning the parents are usually responsible for the finances. But once a person starts earning they have to start planning for their financial needs. Below are 5 steps that help in setting financial goals and achieving them.

1. Figure out what you want in life

Knowing what you want in life is very important to set goals. Saving up for retirement is a basic goal and everyone has it in their list. But do you want to buy a home in the next few years or want to fund your children’s education or marriage or build an emergency fund or pay off a credit card bill? All these are goals. Write them down on a piece of paper. Nothing in life is silly. Taking a vacation, or buying an expensive watch or eating at an expensive restaurant all can be things you want in life and can qualify as goals.

2. Prioritize

Once you have noted down the goals the next important thing to do is to prioritize them. Not all goals need equal attention. Depending on the time to achieve it and the amount to achieve it, goals can be prioritized. One need not work at one goal at a time, in fact, they can work on multiple goals simultaneously. Divide your goals on the short-term, medium-term and long-term. Working towards long term goals like retirement should be a priority. Paying off credit card bill can be a priority and once done the amount can be diverted towards another goal like funding for a car or house.

3. Draft a plan

Draft a plan to achieve each goal. Make a budget and write down income and each and every expense. Device a plan to reduce expenses. Divert the savings towards investment. Also, have knowledge about different investment avenues available and decide where you want to invest to meet the short, medium and long-term goals. FinPlay has in-built goals and also lets you customize it. It suggests mutual fund investments based on your goals, risk appetite, and investment profile. Also, for other investments, you can always consult a financial advisor.

4. Automate

Automate your investments and payments. If you choose to invest in a recurring deposit or a SIP in mutual funds, it is easier to automate these investments. Life gets easier with automation and also helps in smooth cash flows. Also, with the automation of investments at the beginning of the month, you will have less to spend in your hand and can reduce all unnecessary extra expenses.

5. Monitor

Monitor your progress towards the plan you made. Having goals will help you monitor your status regularly. Investing is not a one-time thing. You cannot invest and forget. You have to check your progress. If your investments aren’t giving you the required returns then you should consider rebalancing your portfolio.

Conclusion

Set your goals and work towards them. The first step toward reaching a goal is to make a plan. Financial planning isn’t just for families it’s for everyone. The sooner you start working towards your goals the better it is. When investing in mutual funds there isn’t a right time to invest. Stop timing the market and concentrate on the time you stay in the market. For goals with a longer duration, it is better to start investing early as they are the ones which will cost a lot. Also, investing in an equity mutual fund is highly recommended for long-term goals. For short-term goals, debt funds are the best. For medium-duration goals, hybrid funds and equity funds are better.

FinPlay helps you to fulfil your goals. It can be a vacation in Europe for 2 weeks or buying a dream car or bike or planning your kids’ education. We have a solution to all your problems. At FinPlay, we give you a portfolio that best suits your goal, your financial conditions, and risk appetite. Have a look at our recommended goals.