Category: Financial
Financial goals
December 5, 2016
Most of us, if not all of us have financial goals that we look forward to achieve regardless of the stage of life each one of us is in. However, achieving these goals might not be all that easy down the line especially with various eventualities that shift your priorities from time to time that change your family budget too. Therefore, being realistic as you set your financial goals is very important as well as tracking your progress for you to succeed in achieving these goals.
For those who are already in marriage, achieving personal financial goals will be a big lie especially if you do not sit down together and agree with your spouse how you intend to achieve that. It is better for couples to have similar financial goals based on a complete family budget to achieve what they have planned on achieving as far as their finances are concerned.
As you sit down to plan on your financial goals, setting out your short-term, mid-term and long-term financial goals is only the beginning. These plans may include an emergency fund, a dream vacation, retirement savings, new home, and college savings, among others. With this in mind, you can go ahead and determine how much money you will need for each of these.
Some of the discussions that revolve around a specific financial goal at this stage are the amount of money you will dedicate to that; if it is a school for your child, whether you will go for a private or state school. On the other hand, if it is a retirement plan, you need to base your calculation on when you plan to retire and the kind of life you wish to lead once you retire.
Next, you need to arrange your goals in order of priority and thereafter, determine how much time you have to save for each of the goals set. Normally, short-term goals are set to be fulfilled within one or two years while long-term ones take longer than this to fulfill. You also need to check how much interest your money will be gaining over time where you choose to keep it before that period elapses.
It might be difficult to determine the capital gain yields in future in this case but you can work with an estimate, which will give you a rough idea regarding the earnings to expect. Once you have all that in place, figure out how much you will need to save towards a particular goal each month and do not shy away at the sight of the huge amount of money you require to fulfill it.
You also need to monitor the progress every other month or quarterly and if you discover for some reason something is not working out as per your plans, sit down and review your family budget. This will help you realize expenses you can cut down so that savings can be made available to meet financial goals. Also, ensure that you have provisions for such windfall gains as tax refunds, bonuses, inheritances, and the like.
Financial Emergency Fund
There are various kinds of savings to opt for and whenever one decides to save, it is with a particular intention in mind. Mostly, the plan is to use the funds to fulfill something in the future against a family budget and monthly expenses. This is what savings are all about but even with all the options available, individuals pay little or no attention to savings that are supposed to take care of emergencies.
The financial emergency fund implies that someone has some money set aside to take care of emergencies or what is commonly known as a rainy day. Whether you have a plan in place or not, it is definite that one day the rain is going to come beating down on you, and if you had not prepared for this, then it will be unfortunate.
It is recommended that one should have savings to cover between three to six months expenses in their emergency reserves. Even for the employed, this is important because in an unfortunate incident, one may get sacked and if they have some emergency fund in place, they could survive for some time.
As you prepare to set aside some emergency fund, you need to calculate all monthly expenses and base your savings on that. This will help you realize how much you need to save if you opt for the three months or six months plan. A quick look at each of this plans when you finally have the figure in mind can be alarming.
Individuals are forced to believe that this is a huge amount of money and that any of the two plans is too ambitious to achieve. This might be true but if you consider the amount of money you will need to save for retirement, then you get a complete change of mind because it is much more than three months or six months worth of savings.
From there, the next big question that many have on their minds is how they will be able to finance their emergency budget. You will be surprised to find that the answer to this question is within reach. Some off the ways to achieve this would be to cut down on the amount you send to your credit cards and put that cash in the emergency fund.
Other options are opting for a cheaper car as you shop for one, saving some money from your next bonus payment, reducing on your family budget on the time you go on vacation, dining out fewer times than you have been in the past, among other things. All these are things we do every other day yet we suggest that we have no money left to save.
You also need to assume that your emergency fund is a recurring expense that needs to be funded every other month to cultivate some discipline. Once you have the fund in place, do your best to protect it because it should only be used when an emergency crops up. There is no good day for an emergency to show up, so, the sooner you start saving, the better.