The best way to understand the importance of
long-term financial goals is to imagine a scenario where your income is
dwindling but your expenses aren’t.
Let’s assume due to a health or personal issue,
you’re no longer capable of going to work. At that time, the money you’ve saved
over the years will protect you from bankruptcy. But, if you didn’t save any
money by opting for a long-term investment scheme or hiding money in a
mattress, you’d face a scary financial crunch.
To avoid such situations, it’s important that you
set financial goals and pursue them religiously. Here are a few more reasons to
set concrete, long-term financial goals.
To secure your children’s future
If you have kids, then it’s important that you
and your partner start saving from the time your children are born, if not from
when they are conceived.
Education and living costs are always on the
rise, and if you don’t start saving early, you might not be able to secure your
child’s future. When they grow up, they may want to pursue higher studies
abroad and, as a parent, you’ll be expected to pay the fees. To pay for your
child’s dream, start saving in long-term investment schemes.
To save for medical emergencies
Life is unpredictable and no one knows when an
emergency will crop up. It’s possible that you or one of your family members
might develop a health problem that needs immediate attention, and a lot of
money. In such scenarios, you can’t keep thinking about where to arrange the
money from, because every second lost could worsen their condition.
When you start earning, you can either buy
medical insurance to cover for your entire family and pay premiums regularly,
or you can start saving money in investment plans of your choice, so that no
matter what the emergency, you’ll always be prepared.
To keep a tab on your money
If you don’t have a long-term financial goal,
you’ll never feel the need to prepare a budget. You’ll just keep paying for
your expenses and saving the rest in a bank account, or spending it all by the
end of the month.
Some investment schemes will demand you make
installments periodically, and to ensure you don’t miss any, you will have to
prepare a budget. Deduct your total expenses from your net income and whatever
remains should be saved. This way, you’ll never be able to give in to binge
spending because your extra funds will go into different investment vehicles.
To multiply your wealth
When you’re earning money, it’s not enough that
you keep a certain amount in a savings account every month. If you can earn a
lot more, why would you settle for less?
There are several investment schemes that can
almost double your money over a couple of years. This would never be possible
if your funds are just lying in a bank account. Instead, you should make sure
that your hard-earned money gets multiplied over the years. Also, investing in
various market instruments will help you save on taxes.
Now that you’ve learned why it’s important to
have long-term financial goals, let’s focus on how you can set them.
How to set long-term financial goals
Your financial goals are unique and will depend
on your requirements and financial standing. For example, your unmarried
neighbour can invest in risky financial ventures as they don’t have any
dependants. You, on the other hand, might have a family and so you will need to
keep their security in mind. Therefore, your investment plans will differ from
your neighbour’s.
Here are a few simple tips that will help you set
and sustain long-term financial goals.
●
Look for
investment schemes that can meet your life goals. For example, if you’re saving
up for your child’s higher education, then you should invest in instruments
that will mature around that time.
●
Decide why you
might need surplus money in the future. Do you want to buy a house after 20
years or a retirement home? If your desire to achieve something is strong,
you’ll automatically start saving for it.
●
Think of the
money you’ve invested as untouchable. You’re not allowed to withdraw it unless
you have an unavoidable emergency. This way, you’ll not be tempted to pull out
your funds.
●
Make some
investments in your spouse or a family member’s name. It’s easier to sustain
such investments as you’ll not be able to withdraw money on your whim.
What are some good long-term investment schemes?
There are many long-term investment schemes that
will help you earn huge profits.
Fixed Deposits
You can invest in a long-term
Fixed Deposit scheme in a bank or an NBFC of your choice. Choose a
tenure of 6 to 24 months and on maturity, re-invest the amount in another FD.
Continue this cycle till you need the money to fulfill a financial need.
Public Provident Fund (PPF)
If you’re planning to save some money for your
retirement, there’s no better way to do it than investing in PPF. You can start
by investing a small amount and gradually increase it as you start earning
more. By the time you retire, you’ll have a good-sized lump sum.
Mutual Fund
Investing in a Mutual Fund is one of the best
ways of maintaining a long-term investment. You can invest a small sum but
you’ll have to sustain it till the MF matures. Choose both high as well as
low-risk assets while investing in an MF so that you keep earning profits
irrespective of the market conditions.
Long-term financial goals will secure your future
in more ways than one. You’ll not only have some extra funds for yourself but
you’ll also be able to fulfill your family’s financial needs. Also, when you
set long-term financial goals, you ensure that your hard-earned money is
multiplied and not spent on unnecessary things. So, take a pen and paper, list
out your long-term financial goals, and start investing now!
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