Introduction:
Setting financial goals is an essential step towards taking control of your finances and achieving long-term financial freedom. A well-planned budget aids you in tracking your income and expenses, prioritizing your financial needs and wants, respectively. This can lead you to make informed financial decisions and set clear objectives. Setting attainable financial goals is crucial to achieving long-term financial success. Furthermore, creating a roadmap ensures that you stay on track and don't go overboard with your shopping spree.
In this article, we will explore how setting realistic financial goals can provide an actionable route to help you embark on your financial journey.
Have a clear idea of your values. More often than not, it is our values that guide us throughout our lives. Do a thorough analysis of both short-term and long-term objectives, such as buying a fixed asset like land or a house, starting your own business, taking that long-awaited vacation, or retiring early. Understanding your life’s values can help you determine what you’d like to accomplish.
Evaluate your income and expenses: In order to achieve financial milestones, it is important to examine your income sources to have an estimate of your average monthly income. This can include various sources such as salary, freelance income, investments, and other sources. Meanwhile, track your expenses to understand your spending patterns and group them as per their nature. Fixed expenses can include rent, utilities, EMIs, and loan payments, while variable expenses include groceries, entertainment, dining out, etc. This can give you a holistic view of your finances.
Specific and measurable milestones: Often times, having a vague goal will lead us nowhere but lost time and a feeling of failure. That is why having a specific and measurable goal is important. For example, saving or investing money is a very vague idea; instead, determine the specific details associated with this particular financial goal, such as saving 2000 rupees every month from your salary or investing Rs 5000 every quarter. This can be particularly helpful when accomplishing a big financial milestone, such as buying a house. Break down the big milestone into actionable steps, such as saving Rs 40000 in increments for purchasing your dream house.
Non-renewable resource: Often times, we are so carried away with so many variables that we forget the one non-renewable resource: time. Assess the time frames required for achieving your financial goals based on the current situation. Prioritise your goals by allocating them as short-term (within one year), medium-term (one to five years), and long-term (five years or more). This re-iterates the importance and urgency of these goals, giving you a sense of clarity and aiding in navigating amidst challenges and curveballs.
Action: Now that the initiation has been done with, you no longer have to be a victim of procrastination! With all the inputs derived until this point, have a sense of direction as to where you are heading financially. With a concrete action plan in hand, you will naturally find it better than handling finances without any roadmap, as you will be very mindful of your financial behaviour.
Financial discipline: Track your progress continuously. Developing financial discipline can often be a test of our willpower. Stay motivated and track your savings, investments, and debt reduction. Celebrate small wins instead of waiting for the big one, such as refraining from eating outside, reducing online shopping, or splitting it with another person. With the advent of so many tools and applications on the market, it is very easy to track your finances and stay focused. This can give you a sense of financial discipline while strengthening your momentum for long-term financial freedom.
Conclusion:
Creating a personal budget and staying consistent in adhering to it requires commitment and periodic amendments. However, a budget should make your life easier and not strip you of your joy or freedom. Allocate your funds smartly, bearing in mind your values. By drawing up an actionable plan and taking steps to follow it, it is already essentially a victory. It means setting yourself up for success. Stay committed and pave the way for a secure and fulfilling financial future.
Comments