Earning money is a great and ecstatic experience. Especially, for people who have just started on a new job, receiving their monthly salaries can be exciting. However, a lot of youngsters today are more interested in spending that money instead of investing it. It is important to inculcate setting financial goals early in life and reap the benefits of financial planning. There is a common misconception that financial planning and investing money is only for older people. On the contrary, it is very beneficial to set up financial goals at an early stage.
Setting goals the right way
People invest money so that they can have enough money to meet their financial goals in the future.
Here is some goal setting tips using an example. Let’s see how to set financial goals and some common financial goals of Mohan, a government employee.
A lot of people in the country have various types of financial goals and the above-mentioned are some such examples of goals on their wish list. However, from a financial and investment standpoint, these goals are vague.
For instance, let’s take the first goal: Buy a car.
Invariably, there are a lot of follow-up questions that arise when Mohan says that he wants to buy a car.
What type of car does he want to buy?
How much does the car cost?
When does he want to buy it: Next month, next year or two years later?
Goal setting tips
It is very important to ask the aforementioned questions because only then can you set a goal that is clear and definite.
There are two very important factors to consider whenever you set a goal:
a) Time estimate
b) Cost estimate
When you know these two components, it becomes easier to take the right course of action in order to achieve the goal.
In this example, Mohan can say: “I would like to buy a car that costs Rs 8 lakh in the next twelve months.”
Benefits of financial planning
1) Achieving your milestones
It is crucial to meet financial goals at the right time. Imagine if you have reached your retirement age but your retirement fund is not as large as you expected! Proper financial planning can help you meet your goals successfully.
2) Beating inflation
As the years pass, inflation reduces the purchasing power of an individual. For example, imagine you have Rs 100. With this amount, you can buy 10 glasses of milk today. But after ten years, you may be able to buy only 5 glasses (or less) with the same amount. As a result, it is important to actively plan and monitor your financial situation regularly.
3) Back-up in case of emergencies
Nobody knows when an emergency situation can rise up. Situations such as accidents, loss of job, or other unforeseen events do happen. But when they occur, it is always better to be prepared financially. By creating an emergency fund, you can take care of yourself and your family during such events.
Setting goals is necessary. But for these goals to fructify, it is necessary to do it the right way. Identify your financial needs and requirements as precisely as possible. And once you do that, you can make better investment decisions.
Everyone has goals. But they keep changing at different stages of life due to evolving circumstances. At an early age, new career beginners are eager to save or spend on a new vehicle or lifestyle appearances. However, as they grow older, priorities shift and goals such as family and retirement come into play.
Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.