Defining Short & Long Term Goals: A Key To Financial Success
Do you remember having a study plan as a student? Usually, the more diligent students always had a plan and knew what they would be studying in the coming week or month. That’s how they managed to stay ahead – and the same is true of financial planning.
Mar 2023
3 mins read
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Do you remember having a study plan as a student? Usually, the more diligent students always had a plan and knew what they would be studying in the coming week or month. That’s how they managed to stay ahead – and the same is true of financial planning.
Financially aware individuals who set up time-bound financial goals have a better chance of achieving their life goals. Once you have defined your goals, you can strategise better in order to succeed. For optimal planning, it helps to break these down into short-term and long-term goals:
Short-term financial goals
If you are looking to achieve something within a 3-year time span, you should probably put it on the list of your short-term financial goals. This includes goals like paying off expensive debt, or setting up an emergency fund. For these objectives, you may choose to invest in debt funds like ultra-short-term funds or short-term funds.
Long-term financial goals
Long-term financial goals look at the bigger picture, and grander objectives like wealth generation, financial stability or achieving a life-long dream. Long-term financial goals might include retirement plans, child’s education plans or setting up a high-investment business. To achieve these long-term goals, you might want to consider long-term equity-oriented mutual fund schemes or fixed-income sources such as fixed maturity plans.
How goal-setting helps
- It gives you direction in life
When visiting a new city, your first instinct is to look at a map. Then, you find the modes of transportation, hotels and other services. You plan things out before making a move. Similarly, financial planning gives you a sense of direction to progress towards a financially secure future. For instance, if you need to buy a house, you know you have to start by sorting out your income and expenditure. When reviewing expenditure, you must decide what stays and what goes. On the income side, you must make choices regarding investments, weighing options such as Equity, ELSS and Debt Mutual Funds. Once you have defined the path, follow it diligently till you reach your destination. - It helps you fix your budgets
Once a financial goal is sorted, you must decide the amounts you want to save or spend each month. Budgeting becomes a healthy habit that prevents you from making unnecessary expenditures. Investments should also be a part of your budgeting process. While drawing up your monthly and yearly budgets, especially for mutual fund investments, it might help to calculate your investments using a SIP calculator. - It enables you to develop targeted strategies
Every tool and strategy has its own applications. Your desire for an iPhone dictates a different approach compared to your longing for your dream house. If your goal is modest and long-term, a pure fixed income scheme or a conservative hybrid fund might be the right choice for you. If you have an ambitious long-term plan, you might want to look into medium-risk investment vehicles, e.g. mutual fund schemes such as equity mutual funds, debt mutual funds or tax-efficient ELSS. - It shapes your life choices
Your choice of career will determine your financial prospects. If your goals are modest, you may be able to get away with an easy-going job and take frequent time off. But if you’re ambitious, you’ll have to aim for a high-paying job and pursue better qualifications, take fewer holidays, work overtime and ensure upward career progression, even switching careers if necessary. - It keeps you motivated
It’s human nature to keep an eye on the prize. Thinking of that glittering goal will help you be more productive and more driven in its pursuit. You can cut out distractions and overcome fatigue and other hurdles to achieve greater success in life.
Ultimately, financial goal-setting helps you build a roadmap towards financial stability and prosperity. It helps you assess every move and alerts you to make corrections in order to keep your life on track. It is an important part of life-planning and will help you live life to the fullest – so start setting your goals today. Contact a financial advisor before investing.
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
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This is an Investor Education and Awareness Initiative by PGIM India Mutual Fund.
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MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindia.com/mutual-funds/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
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