Everyone must have financial goals. Let me rephrase that – ‘Everyone must have well defined financial goals’. And of course these goals have to be realistic to a certain extent. Goals can be divided into short term and long term goals.
Long Term Goals: There are different definitions of long-term goals. Some people define it as ‘goals that can be achieved over your lifetime’. To me this is a bit vague…For me its anything that needs to be achieved in the next 10 years or more. Reaching these long term goals require lot more self-discipline and commitment than reaching short term goals. Some examples of long-term goals are – funding for your child’s secondary education or saving up for a comfortable lifestyle for your retirement.
Short Term Goals: Goals that you want to reach within the next five years are called short term goals. Example: saving for the deposit for your home or saving for your next big travel expedition….
Some tips on reaching your financial goals:
* Determine What They Are: Create a file for your goals.. Write down what your long term goals and short term goals are.
* Target Period: Write down by when you want to reach your goal…example by 2010 or 2015 or 2020…
* Make Them Specific: Write down how much you need to save to reach those goals. A bit of research is probably required to make them specific. First you need to determine how much you need in today’s terms to reach these goals. Then you need to convert that figure to future date value (its value in the target period)…I will write more about the future values in another post.
* Action: Then write down your steps for action…Maybe for your child’s secondary education expenses you plan to buy an investment property and pay it off by the time the child begins his/her secondary education. Whatever the action you plan to take to reach a goal, write it down and then of course act on it…Start investing.
* Periodic Review: Go back and visit each of your goals periodically…Look at your investment performance and check to make sure that they are on target…