If you want to become financially secure, it is extremely important to set short-term, mid-term, and long-term financial goals.
Even if you plan everything, you cannot be fully prepared for a crisis that may come up anytime. The unexpected bills are the main reasons that affect our financial goals.
Ways to set financial goals
1. Establish a budget
Determining a particular amount of budget is the first and most important thing. You should have a clear idea of where you stand and how you can proceed forward.
Money tends to slip through the cracks in the pockets of individuals. You can download an app that can track all of your expenses.
Moreover, you need to have the information from all of your accounts in one single place so that you can conduct a proper analysis of the same.
In due course of time, you will realize that the small spending that you do in the canteen every day might add up to a considerable amount. Once you get an idea of how you spend, you will be able to track and save your expenses.
2. Categorize your financial goals
Proper categorization of your financial goals will help you target your orders. This should be the basic rule when you are proceeding toward your financial goals.
It should be broadly divided into short-term, mid-term, and long-term financial goals. When you are setting up your long-term goal, you need to keep in mind all the targets that you have for the short term.
Start by listing all of your routine non-negotiable expenses that are involved. The amount that is left after all the expenses are over goes for investment.
You have to make sure that you have set down the goals with an estimate of their costs. Make wise decisions when you are choosing different investment options.
For this, you will have to figure out the amount that you need to keep aside monthly for investment.
Additional read: Financial mistakes to avoid
3. Deadline for each goal
When you have set the categories of different types of financial goals, start setting deadlines for each of them. Long-term financial planning should be followed religiously.
There can be minor changes that can be made to short-term goals. Suppose you have a child who will start going to college by 2035, then you should start saving and investing accordingly with a deadline in mind.
When the deadline arrives, you must be ready with the funds that will be required for your college education.
Next, if you plan to take a trip to your favorite luxurious destination, start saving and investing with a specific deadline that has to be followed at all costs.
You can keep a tab on all the deadlines through a financial goals worksheet. It will also help you to analyze your dates from time to time.
4. Prioritizing all types of financial goals
With all the types of financial goals queued up, you need to start prioritizing all types of financial goals. If a situation of urgency is created, you would know which goal has to be prioritized first.
Moreover, label each goal on your worksheet as need, critical, and want. This will create a distinct difference between the types of priorities that you keep for your finances.
5. Clear off your debts and build an emergency fund
Clearing off your debts will help a lot to streamline your entire financial planning. First and foremost, take a look at all of your existing debts.
Make a proper plan for it and clear it off as soon as possible. Once that has been done, you can start creating your emergency fund.
Your emergency fund should contain at least 12 to 24 months of your living expenses which will include your loan EMI as well.
Make sure that you dip into your emergency fund only if it is extremely necessary. It can prove to be extremely counterproductive on your part if you set aside this fund completely.
FAQs
Why is setting financial goals important?
Setting financial goals is crucial for achieving financial security and planning for unforeseen financial crises.
How can I track my expenses effectively?
You can track expenses by using budgeting apps that consolidate your accounts and analyze your spending patterns.
Why should I categorize my financial goals?
Categorizing goals into short-term, mid-term, and long-term helps you allocate resources efficiently and plan for each type of goal.
How can I set deadlines for my financial goals?
Establish deadlines by considering the nature of each goal and your specific target, ensuring timely savings and investments.
Why is prioritizing financial goals important?
Prioritization helps you identify which goals to focus on first, and labeling them as “need,” “critical,” or “want” clarifies their importance in your financial plan.
