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Setting Financial Goals

Nobody imagines an uncomfortable life pre- or post-retirement. But only a few people plan for such comfort. To begin with, put this ‘comfort’ into words. These words will define what you are working for. If you are not working towards a particular aim, you might spend higher than you need to do today. Although, putting comfort into words is not all you need to do.


Setting short to medium-term goals is vital to achieving this. Your vision will guide these goals. Defining comfort lets, you think ahead and have a chance to work through things and prepare for any situation, predictable or not.


Financial goal setting is a continuous process. It starts with the definition of comfort, which should act as a guiding light to be money wise. It allows you to check progress in a financial and update your strategies to reduce any deviation from the final target. Setting a vision enables one to account for unpredictable situations and set apart an emergency fund that supports a firm financial standing even in a catastrophic event. The COVID-19 pandemic is one such event.


While planning the future of Microsoft, Bill Gates decided to have enough money in the bank to pay one year’s salary even when there is no money flowing into the business. Many people call it conservative, but we think it was a bold move. Imagine the amount of innovation without having to focus on going cash stripped. Imagine yourself having such a reserve and the amount of freedom to do what you want that comes with it.


Never set goals before?

Don’t worry about the time you have lost. Focus on the time which is yet to come and create or maintain a firm financial footing. Remember these golden rules:

1. Proper financial planning starts with understanding what comfort means to you. Focus on how you want to live your life when you are 50 years old.

2. Direct your short-term goals at achieving the medium-term goals. Include setting a monthly budget, annual savings and investing target, reducing debt, and starting an emergency fund.

3. Medium-term goals cover your health and life. Therefore, insurance is the steppingstone of medium-term goals.


Directing short-term decisions towards medium- and long-term

Directing short-term goals towards achieving medium-term goals and so and so forth to achieving long-term goals is a very confusing statement. Here’s an example to help you start:


“I will buy life and health insurance to cover my medical expenses if the need comes. I will set aside 30,000 for annual instalments. The maturity amount of health insurance when I am 50 years old should be 1 crore.”


In this example, you have planned an annual payment in the short-term to cover unforeseen medical bills in the medium-term and retire with a fund of 1 crore in the long term.


Do you see how one decision today allows you to have a good lifestyle and financial footing in the future?


Short-term goal setting

1. Establish a monthly budget and revisit it after every month. Within 3-6 months, you will minimize the deviations in planned and occurred expenses. Read the article, Personal Finance Management, to start setting your budget. We are building a free product to help you with the math.

2. Start an emergency fund. Save, without a target. This money is supposed to be incurred on unpredictable expenses without destabilizing your savings and investments.

3. Plan your debt repayments. Read this article, EMIs and SIPs, to plan your loan’s term, EMI, and related savings.


Mid-term goal setting

Having established a monthly budget, annual savings and investing targets, and an emergency fund, decide how you want to cover your life, health, and debt.

1. A prudent option is to buy insurance, both life and health, and keep the emergency funds for a catastrophic level event only. Insurance will allow you to focus on other essential aspects of financial planning by freeing you from any expected or unexpected medical bills.

2. Paying off debt is your next priority. You had planned your EMIs and SIPs in short term goals, and it is time for that SIP to mature. Make sure this amount is paid off against the remaining loan.

3. Achieve your dreams. Maybe you wanted to buy a home, or a new car now is the time. This, too, was a part of your vision; therefore, we are assuming you made a fund for this dream in short-term goals.


Long-term financial goals

You might or might not want to retire from work. However, you will want a comfortable life. Once you have defined what comfort means for you, determine the money you will need to fund it. Plan your health insurance, deposits, and investments to mature around this time to ensure a large corpus fund. Greater the corpus fund higher the interest you will earn, even in a savings account.


It is not difficult to achieve your long-term goals when the short- and medium-term goals are planned to achieve this end goal. All the objectives will lead you here.


“No more efforts” is what you tell yourself on this day.



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