Taking the plunge
Finalizing your goal
Why is a financial goal important? “A goal without a plan is just a wish.” Much like any other important objective you may want to get to in life, such as getting fitter, ensuring you eat well, or achieve any other milestone, financial goals are equally important. In fact, in most cases, prudent financial practice is an enabler to life goals.
So, what steps should I follow to set these?
Figure out what matters to you. Put everything, from the practical and pressing to the whimsical and distant, on the table to evaluate. Sort out what’s within reach, what will take a bit of time, and which must be part of a long-term strategy.
Make yourself a goal chart!
Developing a financial goals chart is a good way to begin this process.
Write down 3 personal financial goals. They should be specific, measurable, action-oriented, realistic and should have a timeline.
Decide if your goals are short-term, mid-term, or long-term, and create a timeline for that goal. This may change at any time based on your situation.
Quick tip! Determine how much money you need to save to reach your goal and separate that amount by the month and/or year.
Types of financial goals
Any goal that you might need to achieve within 1 year could be called a short term goal, anything that you might need between 1 year to 5 years could be a medium term goal and post 5 years they are long term goals.
So! That television you want to buy could be a short term goal, your car purchase could be a medium term goal and your retirement a long term goal.
To achieve financial goals
Think of all the ways you can reach that goal. Include saving, cutting expenses, earning extra money. Prioritize, then achieve. After accomplishing some of the easier goals, you gain confidence in your decision making That provides motivation to achieve the more difficult targets that require more time and discipline.
Your Money Personality
Risk
Risk is defined as the chance that your investment’s actual return will be different than expected for various reasons. Fact check : All investments involve risks, and fluctuations in the financial markets and other factors may cause changes in your investments over time.
What does risk mean for me?
How you divide your investments among stocks, bonds and short-term investments is an important factor in determining the long-term return and risk of your portfolio. You should select investments only after you've determined your risk profile/ personality based on a risk questionnaire.
Why should I assess my risk?
How we perceive risk varies from person to person, so you and possibly your friend earning just as much as you will not have the same risk profile. Your tolerance to risk depends upon an individual’s temperament, experience, knowledge, investment and alternatives, and time for you will be invested. A risk questionnaire helps you arrive at your risk profile which guides your investments in mutual funds.
What is a mutual fund KYC?
‘Know Your Customer’ (KYC) is a general term for the process used for identification of a customer when you open an account with a financial entity. KYC establishes your identity & address through relevant supporting documents such as prescribed photo ID (PAN card) and address proof (there are various options to this).
KYC compliance is mandatory under the Prevention of Money Laundering Act, 2002. KYC is mandatory if you want to invest in mutual funds.
Mutual funds are a great way to start
Mutual funds are a great way to start for first time investors. Not only are they easy to invest, you can also start with an amount as low as ₹100 per month. As discussed above, mutual funds can help you meet your financial goals if planned well.
