How to Set-up and Achieve Your Financial Goal?

With regards to financial goals, two things are most important – Setting the goals & Achieving them. 


1. Setting Up Financial Goals

Let’s start with setting up financial goals. Roughly three steps are involved in this process:


a. Understand what matters to you

Take a deep glance into your dreams, aspirations as well as needs, and understand what matters to you. 


b. Prioritize them

Now, prioritize them. Remember, the more you want to achieve, the more pressure you are putting on yourself. So plan smartly. 


c. Assign a time horizon

Now that you know your priorities, sort them into the time horizon within which you want to achieve them. Keep in mind the short-term, medium-term, and long-term goals that we discussed in the last chapter. 


2. Achieving Financial Goals

Now comes the main part – achieving these financial goals. Since you have the goals in mind, you have better visibility of what you have planned within the next 2 years, 2-5 years and more than 5-years. 


Here are a few common ways to achieve them:


a. Create a monthly budget

Whether you are salaried or self-employed, you will have an idea of how much you earn in a month. Right?


Budget out the salary into your monthly spending and monthly savings. 


b. Cut out the unnecessary expenditure

We all spend unnecessarily, though the definition of what’s unnecessary may differ from one person to another. Understand what you can avoid and then cut it out from your life completely. You will be surprised at how much you can save by doing this. 


c. Control debt

This is one of the most important steps in this process. Debt is a poison that eats us slowly. 


The first and the most important rule of financial planning is to keep the credit card clean. 


How can you do it? From the beginning itself, pay the total balance and never the minimum balance. 


If you already have a large outstanding, check the total balance due to the credit card and break it into 6-monthly or 12-monthly installments and pay it off. Then, of course, minimize using the credit card  so that the debt doesn’t pile up again. 


We understand that certain kinds of debt are necessary. For example, most people buy a house using a home loan or a car through a car loan. These costs are budgeted out into the monthly expenditure because there is no concept of minimum balance. You have to pay the EMI every month.


d. Re-evaluate your goals

Another very important step. What matters to us today may not be important to us after 2-years. So be ready to re-evaluate your goals and make changes that fit your lifestyle. 


e. Invest smartly

Last but not the least, invest your money smartly. Evaluate your knowledge level and invest in financial instruments that match your risk and return profile and time horizon. Make your money work for you. 


In this chapter, we spoke a lot about saving and controlling expenditure. However, do not forget to spend on things that make you happy – be it travelling, watching a movie, or eating out. Our point is not to overdo anything or spend unnecessarily. But being happy is at the core of everything. 

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