Setting up priorities is a day-to-day struggle in life, yet essential to proceed smoothly. Similarly, setting up money goals on priority makes it easy to focus and divert money, accordingly. Prioritizing financial goals simply means knowing money needs and prime money concerns of life. Read through to get more details.
What Are Financial Goals?
Financial goals are targets for reaching future money needs. They are often about saving or paying off debts. These goals can either be small or big, and long-term or short-term. But they must be achievable within the desired time frame.
Most people tend to underestimate what they can achieve over time. A financial expert can play a major role in estimating the achievable milestones over the period. Approach online advisory like ArthaYantra to get expert advice from certified financial planners.
Tips To Set Money Goals
Identify and prioritize money goals to sort your finances. Below are some helpful tips to list out money goals.
- Select realistic, achievable and specific goals. Keep each goal simple.
- List them out on a paper, separating big and small money goals. Big money goals include saving to build an emergency fund, buying a home, or retirement saving. Small money goals may be paying off the credit card, saving for a vacation, etc.
- Give a timeframe for every goal and allot ideal amount to reach each one, after considering the inflation rate.
Prioritize The List
After jotting down your goals, prioritize them based on the importance and urgency. Some of your top priorities may include:
1. Paying Off Debts: Your first goal should be to clear debts as soon as possible. Clearing your high-interest debts like the credit card or hand loan allows you to divert your money towards savings. Consider transferring the debt to lower-interest loans first and plan to clear gradually.
2. Building Emergency Fund: Plan to build the emergency fund of three to six months income. Emergency fund equips you to deal with unexpected happenings of life and you do not have to look around for monetary help in such circumstances.
3. Retirement Planning: Retirement planning should be one of the top priorities. Starting with small amounts on regular basis also help save huge over time.
4. Saving To Buy A Home: Dream to buy a house tops the ‘lifetime to-do’ list for most people. It is a big money goal that needs a huge corpus. A systematic plan is essential to achieve this goal.
5. Planning for Kids’ Higher Education: Kids’ education is another crucial goal for many parents, which can be achieved through dedicated savings and right investments.
Many more priority goals could be included based on the individual’s portfolio. Get your personalized portfolio after discussing with a certified financial planner.
Once the priorities are listed, take steps towards reaching those goals. Simply saving towards the dedicated goals may not be sufficient in reaching them within the timeframe. Rather, park the money or invest through the right channels. Investing in a well-diversified mutual fund portfolio helps your money grow over a period of time, beating the inflation. A periodical review is also essential to understand the performance and changes are to be made if needed.
In conclusion, knowing your net worth is crucial to set financial goals and build a suitable plan. Net worth is the difference between what we owe and what we own. It shows the way to know if we are heading in the right direction.