Whether it is buying a house, having money to save for our retirement, travelling the world or having a satisfying peace of mind, we all have a vision of enjoying a life without having to worry about money. However, it is not a sudden wealth achievement.
It demands planning, discipline and consistency. Image financial goals as a journey: You have a road map, fuel and determination to get there. The following are the five best ways to achieve your financial goals.
1. Set Measurable and Achievable Objectives
It starts with being clear on what you are doing it all for. Most will say that they want to be rich or they want to be financially free, yet this is an abstract concept. Rather, just be precise. For example:
•Invest 3 years and save up 5 lakhs towards home down payment.
•Save up a 6 month expense emergency fund.
•Have & 2 crore at retirement to age 60.
Well set goals provide direction and feasible goals will give you the urge to work. First, it is recommended to write them down and split them according to time: short-term (12 years), medium-term (35 years) and long-term (10+ years). In this manner, you are able to prioritise and work on what is of utmost importance at the moment.
2. Prepare a Budget and Keep Record of the Expenses
Financial planning is made up of a budget. Unless you do, you will not be in a position to know what that money is doing and your dreams will just be dreams a long way off. Begin by monitoring your monthly revenues and expenses. Divide them by the idea of essentials (rent, food, bills), non-essentials (entertainment, dining out) and savings/investments.
Consider the 50-30-20 rule:
•50 % of your needs income
•30 per cent of wants
•20 percent savings and pay-off of debt
You do not have to sacrifice all the small pleasures in life but you need to plan your expenditure. Consider simple changes, such as cutting down shopping sprees online or restricting the number of takeout meals and the money you spend can be freed up in order to contribute to your objectives.
3. An Emergency Fund should be built.
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Before rushing towards the bigger things in life such as investments or purchasing a house get your life insured since life is unpredictable. An emergency fund is a financial backup plan, and it cushions you against unforeseen expenditures such as medical bills, loss of job, or emergency auto repairs.
It would be preferable to have 3-6 months of living expenses in an accessible bank account, i.e. savings account. This buffer will mean you will not have to raid your long-term investments or go into high interest debt when calamities strike. It is one of the foresighted and sensible actions to achieve financial independence.
4. Begin and Invest Wisely
Putting money in the bank all by itself is not going to cause your money to grow (inflation will. All the more reason why it is important to invest. Based on your risk-ingredients and ambitions, you have a choice of stocks, mutual funds, property or retirement schemes.
The sooner you start the better your compound interest will work on you, that magic of getting interest on interest. Any investment, whether small or large, even at low rates, will over the years turn into a lot of wealth. As an example, a monthly investment of 5000Rs at the rate of an average 10 percent may grow to over 1 crore in 20 years.
You simply cannot willy-nilly go into investments, learn or consult with a financial planner. Spread out your investments in different assets and never use investments that have a differing time horizon with the goals of the investment.
5. Remain Focused and Follow Ups
The thing that transforms plans to accomplishments is discipline. Live within your budget, set up automatic savings, and do not get in too much unneeded debt. However, money objectives do not stay the same–they vary with the stage of life. Priorities can change because of marriage, children, promotions or even what is happening internationally.
This is why it is necessary to analyze your progress with 6 to 12 Month intervals. Ask yourself:
• Have I gained more towards the goal?
• Do I have to change my investments or my budget?
• Have priorities been changed?
Periodic reviews help you stay on course and are able to adjust without stalling.
Conclusion
Financial goals are not so important to what you earn but rather how well you plan, save and invest on a continuous basis. Clear goals, laying out a budget, establishing an emergency fund, investing well and being disciplined puts you on the road to financial success.
It is not easy to amass wealth (it takes time, discipline, and hard choices, so remember that as you go on). The sooner you begin and the more regularly you do it, the sooner you will be in the position to live the life that you always wanted to live or dreamed of being, financially free and fuss free.