How to Set Financial Goals for Your Future – Unboxing Startups
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When it comes to securing the future, financial goals are a must. It is always recommended to plan for the long term. To ensure your future and free yourself from financial glitches, start planning your financial goals for your future today.
Overall there are three ways you can set your financial goals.
1. Short Term
2. Mid Term
3. Long Term
A person with a vision can decide the financial goals and can attain promising results over some time. It is always good to have a backup, and especially when you plan to retire, you must have all the investments you made 20-30 years ago. In every phase of life, there is a different requirements. For instance, when you’re a kid, you demand fora bicycle; when you grow up, you look for an education loan, and adults look for a property, so overall there is a requirement for financial resolutions throughout life.
Short-Term Financial Goals
Setting short-term financial goals can give you the confidence boost and foundational knowledge you need to achieve larger goals in a short period.
These first steps are relatively easy to achieve. Though you can’t immediately make $1 million appear in your retirement account right now, you can create a short-term financial budget, and you may be able to save up a decent emergency fund in a year.
Here are some critical short-term financial goals that will start helping right away and get you on track to achieving longer-term goals. Not only this, but it will also help to reach your financial goals.
1. Create a budget and stick to it
The basic foundation of creating a financial goal is to create a budget. You must keep a separate budget from your salary. It provides a clear vision of your expenses and savings. Rest what is left you can use for creating a budget. Creating a budget is one of the best ways of knowing your financing limits.
It is equally important to stick to your budget and abide by it strictly. This way, you can achieve your financial goals quickly and conveniently.
2. Create an emergency fund
In the above information, we talked a bit about an emergency fund. This fund is used when unexpected circumstances come, and you need funds to tackle the situation immediately. The emergency could be anything, for example, medical bills, car service, unemployment, financial loss, etc. In such cases, you must be able to spare some funds and deal with the scenario confidently. Thus, creating an emergency fund is integral to making financial goals.
3. Try to chop your credit card bills
Credit card bills should be taken seriously and must be paid off at the earliest. Debt reduces your saving capacity as you pay a lot of interest and installments, ultimately decreasing your savings. Credit card bills are like a slow poison and don’t fall into the trap of minimum pay. Try to pay all the credit card bills in 3-4 months.
Tip- Don’t extend your credit card limit until it’s required.
Midterm Financial Goals
When you’ve created a budget, established an emergency fund, and paid off your credit card bills. Then, it’s time to start working toward midterm financial goals. These goals will bridge your short- and long-term financial goals.
1. Get a life insurance
Be mature and get your insurance now. You can opt for any policy depending on your income and needs. Term life insurance is the least complicated type of insurance, which covers almost all the needs of people.
Most term life insurance requires medical underwriting, and unless you are seriously ill, you can probably find at least one company that will offer you a policy.
2. Pay off student loans
Student loans are a significant drag on many people’s monthly budgets. Lowering or getting rid of those payments can free up cash, making saving for retirement and meeting your other goals easier. One strategy to help you pay off your student loans is refinancing into a new loan with a lower interest rate. But beware: If you refinance federal student loans with a private lender, you may lose some of the benefits associated with federal student loans, such as income-based repayment, deferment, and forbearance, which can help if you fall into hard times.
Long-Term Financial Goals
Most people’s most significant long-term financial goal is saving enough money to retire. The standard rule of thumb is to save 10 to 15 percent of every paycheck in a tax-advantaged retirement account like a 401(k) or 403(b). But to ensure you’re saving enough, you need to figure out how much you’ll need to retire.
Estimate your retirement needs
Oscar Vives Ortiz, a CPA financial planner with PNC Wealth Management in the Tampa Bay/St. Petersburg, Florida, area says you can do a quick back-of-the-envelope calculation to estimate your retirement readiness:
- Estimate your average annual living expenses during retirement. The budget you created when you started on your short-term financial goals will give you an idea of how much is your average monthly requirement. In addition, you may need to plan for higher healthcare costs in retirement.
- Estimate how much in retirement assets you need for your desired retirement date. Base this on what you currently have and are saving annually. An online retirement calculator can do the math for you. If 4% or less of this balance at the time of retirement covers the remaining expenses that your combined Social Security and pensions do not cover, you are on track to retire.
- Reduce the income you will receive. Include retirement plans, social security, and pensions. This will leave you with the amount that needs to be funded by your investment portfolio.
Apart from the points mentioned above, your financial goals must also include making optimal use of tax deductions that you qualify for, selecting suitable tax-efficient investments, ensuring tax efficiency, and availing of maximum deductions. In this manner, your financial goals can be easily attained, and you can achieve more with what you have while creating more money. Of course, you’ll have to create a new plan to get through that difficult period, and you may not be able to pay down debt or save for retirement during that time, but you can resume your original plan—or perhaps a revised version—when you come out on the other side.
That’s the beauty of annual financial planning: You can review and update your goals and monitor your progress in reaching them throughout life’s ups and downs. In the process, you will find that the small things you do daily and monthly and the more significant things you do every year and over the decades will help you achieve your financial goals.
Suprotik Sinha is the Content Writer with Synkrama Technologies. He writes about technologies and startups in the global enterprise space. An animal lover, Suprotik, is a postgraduate from Symbiosis Institute of Mass Communication (SIMC) Pune. He carries 6+ years of experience in Content Writing, and he also worked in mainstream broadcast media, where he worked as a Journalist with Ibn7 ( now known as News18 India) and Zee Media in Mumbai.