Everyone has a unique situation when it comes to personal finances. Each has a different monthly fee. When you decide to take responsibility for your financial condition, you are looking for solutions to your personal problems.
TheBusinessPost shares effective tips so you can make a personal financial plan that suits the conditions you face. The first step you have to do is to set your Financial Goal.
What are Financial Goals?
Financial goals are targets that you want to achieve when managing your finances. The tools available to achieve this target are saving, strategic spending, managing income and making investments.
Compiling a list of Financial Goals is very important for preparing a budget. When you have clear goals, planning will be much easier and more focused. This means that the Goals you set must be specific, measurable and have a deadline.
Types of Financial Goals
There are three types of financial goals:
- Short term
- Medium term
- Long term
Short term financial goals
Targets included in this category can be achieved within a year. For example, saving to buy a new computer or a family vacation.
Medium term financial goals
Generally, targets that fall in this category can be achieved within 5 years. This target requires greater effort, but is very achievable with discipline and consistency. Paying off credit card debt, completing a car loan fall into this category.
Long term financial goals
Saving for college costs, taking out a mortgage, investing in retirement funds takes more than 10 years. This is a long-term financial target and its effects can be felt across generations to our children and grandchildren.
7 Examples of Personal Financial Goals
Still have no idea what to target? TheBusinessPost provides examples to get you started.
1. Save to have an emergency fund
Prepare an umbrella before it rains. Life is full of uncertainty. It is very important to have preparations that can relieve and help us when an emergency happens to us or someone close to us.
Saving to have an emergency fund is a must. This should be the first goal you set under any circumstances. Always set aside your income for an emergency fund, and be disciplined not to use this savings unless absolutely necessary.
Losing a job is a rife emergency in the era of a pandemic. Generally it takes us 3-6 months to get a new job. That’s why it’s a good idea to set a target to have savings worth 12 months’ salary (double just in case).
Pay off debt
Paying off debt is one of the most common financial goals. Having large amounts of debt makes us feel bad and can affect our mental health to our productivity. Setting debt repayment as a Financial Goal is easy because the amount of debt and the interest rate are listed on the debt securities and can be used directly for planning.
Apart from paying monthly, the best way to make real progress is to stop borrowing. Adding debt will only push you away from the target to pay off debt. For some, this Financial Goal may be a medium term goal. But there are events to pay off debt quickly.
Saving For Retirement Fund
This Financial Goal is the best example of this kind of long term. Most of us will do this during our productive years. To maintain our style and quality of life when we are no longer working, of course, we need a way so that the savings collected can support us to live 10, 20 to 30 years after retirement.
TheBusinessPost highly recommends consulting a Financial Coach to determine the most suitable form of investment for you. This could be with mutual funds, investing in gold, insurance, and so on. Because we plan for a long life, the sooner we start planning for retirement, the better the results will be.
Owning / Paying Off the House
Buying a home is a very common long term financial goal especially among millennials. In Indonesia, we are facilitated by various parties to achieve this goal, from banking mortgages, gradual cash to developers, to Rent-to-Own TapHomes. For most of us, this goal of owning a home will have the greatest value in life.
Preparing a sufficient down payment will greatly help to achieve this Financial Goal. The reason is that with the reduction in the nominal amount we owe, the amount of interest we must pay also decreases. That way, the value of our equity will also rise faster.
Private Vehicles to Support Mobility
Car ownership loans usually have a term of 3-5 years, which categorizes this target as a medium-term Financial Goal.
During the car installment period, you automatically need to allocate a portion of your monthly income for installment payments. Once paid off, there is no need to rush to change to a new car. The income that you have allocated earlier can be transferred to savings or better yet to investment.
Using this strategy you can start building wealth that will give you financial freedom.
Invest in a College Education
Many of us are hindered from advancing in our careers because of our educational status. Generally, companies will require certain career levels to have at least a bachelor’s degree, even master’s to doctoral degrees for a career in consulting.
There are many ways that can be taken to prepare for this Financial Goal, including taking out a loan for education, accessing home equity, to financing by the company where we work with the reciprocity of our service.
For him, the nominal required for this Financial Goal does not 100% determine the quality of education received. You can try more to get into a state university that has quality teachers and students at a relatively low cost.
Slip a Plan For Recreation
On the other hand, examples 1-6 are considered “adult”, you also need release and entertainment. This can be used as a target for your Financial Goal to save money so you can vacation comfortably without thinking you are “wasting money”.
If you don’t like vacations, then your recreation can also be in other forms, for example buying a big screen TV, a cool new cellphone, and so on. Use this Financial Goal as a reward for yourself after struggling to achieve other Financial Goal targets and also to keep your motivation high.