A Blueprint To Accomplish Your Financial Goals In 2022
Setting realistic financial goals is one of the finest methods to get control of your finances. We are sure many of you have no idea where to begin with your money. Continue reading to find out how to achieve your financial goals in the year 2022
Money is one of the most stressful factors in people’s lives to manage. Many people believe they do not have enough of it. Others are unsure how they will pay their expenses. Others are still con- cerned about their retirement and whether they will have to work for the rest of their lives. There are other folks who live pay cheque to pay cheque and are anxious about meeting their critical financial goals. Despite the fact that budgets are the best way to get control of your finances, they sometimes scare people because they fear they no longer have control over their money.
Defining Financial Goals
Financial goals are priorities that you set for yourself in order to accomplish some financial results. They mainly centre on money and how to save and spend it. Because everyone has various priorities, everyone has distinct goals. Your objectives may alter over time as your priorities shift as a result of what is going on in your life. When you don’t set financial objectives, you wind up spending money in places and amounts you are unaware of. Financial goals are crucial since they assist you in achieving a specified outcome. They may also assist you in developing a step-by-step approach to get the desired results. They assist you in resisting impulse purchases while keeping track of how much money you spend and where you spend it.
There is a terrific framework known as SMART that you may utilise when building a strategy for financial objectives in order to reach financial goals. It is an abbreviation that stands for Specific, Measurable, Achievable, Relevant and Time-Bound. Assume you wish to put money towards your child’s degree college. Here’s what it would look like if you followed the SMART principles:
Steps for Establishing Financial Goals
The likelihood of accomplishing your financial objectives will decrease unless you establish them correctly. As a result, you should be well-informed about how to correctly define your financial goals. Given below are the processes involved in establishing financial objectives.
Step 1: Identify your Financial Goals : This is the fundamental building block of establishing a financial goal. Setting financial objectives begins with deciding on one. You can scribble down the things you want to accomplish in your life when selecting your objectives. Also, eliminate any ambitions that have no financial value. You have laid the groundwork after you have identified your objectives.
Step 2: Determine a Deadline for each Financial Goal : Even if you modify the date over time, being explicit helps. If you have a child who will be attending college in 14 years, say in 2035, you have a target date for your child’s college goal. This assists you in determining the amount of monthly instalment required to meet your financial objectives. In fact, setting a realistic target date will help you see how far you have come and how much work still has to be done.
Step 3: Determine the Duration of your Financial Objectives : After determining your financial objectives and establishing a reasonable target date, you must evaluate how distant each of your financial goals is from now. The length may be determined by your aim: for example, if you are getting married and want to save a specific amount of money, you are constrained by the date of your wedding. Other goals such as your child’s education or retirement may provide you a bit more leeway in terms of how much time you have to attain them. You might absolutely separate your financial objectives as follows:
• Short-Term: Six months to five year
• Mid-Term: Five to 10 years
• Long-Term: More than 10 years.
Step 4: Determine the Significance of your Finan-cial Goals : If you want to reach your financial objectives, you must prioritise them. Each of your financial goals should be labelled as essential, necessary or desirable. Assume you have a short-term aim of increasing your emergency money, and it is ‘essential’. However, another short-term financial aim is to upgrade your car which is still in good working order — this is a ‘desire’. Prioritising objectives might help you when you are in a financial bind since you will know where to invest your money first.
Achieving Financial Goals in 2022
Now that you know how to chart your financial objectives, let us go on to figuring how to attain those goals in the year 2022.
Make a List of your Financial Goals : Who do you think is more likely to attain their objectives – someone who has only a hazy concept of what they want or someone who has written them down clearly? You guessed correctly: the one who writes them. According to research, writing down your goals increases your chances of success by 42 per cent.
Monitor your Cash Flow : Knowing the answers to questions such as how much money do you make each month and how much do you spend means tracking your cash flows. Using budgeting software is the most convenient method to keep track of your income and spending. We do not believe in having extremely restricted budgets. In fact, rather than using the phrase ‘budget’, we use the term ‘spending plan’. This is due to the fact that you should have a strategy for where your money will go each month.
Boost your Disposable Income : After taxes, disposable income is what remains in your hands. The more discretionary income you have, the faster you will be able to attain your financial objectives. So, search for methods to improve it by growing your income, lowering your costs, or doing both. To enhance your income, you might also explore negotiating a raise with your HR or supervisor, beginning a side hustle, or organising your house and selling the extra on reselling websites such as OLX.
Reward Yourself for Significant Milestones : Most financial objectives are significant. In addition to being flexible and leaving some wiggle space in your budget for activities you like you may set up a system in which you reward yourself when you reach key milestones. Assume your objective is to accumulate an emergency fund of Rs3 lakhs. Simply divide the savings into four smaller milestones of Rs75,000, Rs1.5 lakhs, Rs2.25 lakhs and Rs3 lakhs. After completing each one, you may treat yourself to something nice such as a spa treatment, a new book or a delicious lunch.
With the start of any new year, many of us make resolutions to improve our finances and health. If you follow the steps mentioned religiously, by the end of the year you will find it satisfying that you are on the right track to achieve your financial resolutions.