Whenever someone interested in investing asks me about to Set Financial Goals or how to start investing, the first question I ask is, “what are your investment objectives”?
Almost 80% of them don’t know the “right” answer or they just say – earn more money.
Investing without any goal is like traveling without a destination. Also, if you do not have any specific goals in mind you cannot choose the right product for investment. So, the first step before starting to invest is to set your goals right.
How to Set Financial Goals? What Does it Mean by “Set Goals”?
A financial goal is driven by finance as the name itself says! It means making financial arrangements for the future needs. And, for each person, the need might vary. For one person it could mean setting up goals to save enough to buy a home or for retirement and for another it could mean saving for a daughter’s wedding. No matter what the goal is, it needs to be realistic, clear, and measurable and should have a time frame.
But remember “earning more money” or “become rich” is not a goal. Robert Kiyosaki rightly said, “Money is not a goal. Money has no value. The value comes from the dreams money helps achieve.” Your goal should be based on making your life and future financially secure and money is a tool which helps you achieve it.
There can be more than two or three goals and each goal should have the specific time period, importance and its own cost. Decide and write down these details on a piece of paper.
Prioritizing your goals:
Prioritize your goals on the basis of importance and time. Some goals need longer time e.g. retirement, while others are important to be achieved in next 3-5 years.
Divide your goals into three main categories:
Short-Term Goals (1 year)
Medium Term Goals (3-5 years)
Long-Term Goals (more than 5 years)
Plan to achieve your goals:
1. Planning to achieve goals is a process and it should include:
2. Deciding how much money you need to save to reach your goals based on available time frame. Write it down.
3. Before starting savings make a checklist of available assets, cash/savings already with you.
4. Budget your expenses. It will help you figure out how much you can save.
5. Change your spending habits. Saving money depends mostly on your spending habits.
6. Clear your credit card debts, try to reduce the use. The interest on the credit card is one of the main reasons that lead to lowering your savings.
7. Identify your risk tolerance level. Do not stretch yourself beyond your limit.
Following the above steps will lead you to attain a clear understanding of what investment products you should choose. And therefore, select the investment products which is best suitable to your own goals, risk ability, and duration.
Keep monitoring your goals. Adjust the savings, time whenever and wherever needed. Download some good financial apps or register with some financial websites to keep a check on it.
Good luck and Happy Investing!
Featured Image Source: Pixabay.com
Author: Gayathri Jagdale
Gayatri Jagdale lives in Raleigh-Durham, North Carolina Area. She is a Financial/Investment Advisor and Blogger. She has years of experience working in the Financial Services Industry. She also blogs to bring financial awareness and literacy especially in women in India. To learn more about her, visit her website Fund-Matters https://fund-matters.com/. Contact info: firstname.lastname@example.org
Disclaimer – The views and opinions expressed in this article are those of the authors and do not necessarily reflect any official policy. Examples mentioned are purely examples and are not real-world problems.