We work very hard to earn money and save it for the future, only to end up accumulating a plethora of financial products that serve little or no purpose. Most of us do this thinking it will get us the right returns or because it worked for someone else.
It’s time to move away from this approach and look at ways in which our money can actually make a difference. Even before you begin with where you need to invest and which product will give you the best results, you need to take a step back and ask yourself, “Why am I investing?”, “What do I want my money to do for me?”
Think before investing
Before investing, you need to know why you want to invest. For example, it can be for a new car, a home or children’s education. Once you have the goals in place, you should think about how you will achieve these goals. Today, you have several options such as mutual funds, stocks, fixed deposits, insurance, etc. You need to choose the ones that will work best for you and help you meet your goals.
If you take the right approach towards your savings and make the most of what the market offers, you will be able to create a larger corpus, allowing you to meet your goals. Let us understand why a goal-based approach works the best:
You customise your goals based on your needs and the things you want to achieve in life, which allows you to see your growth. Your goals are very important to you and you are emotionally invested towards meeting them. Investment recommendations could be tailored to meet those goals.
List of financial goals
To start with, make a list of your financial goals. Quantify them based on time; short-term goals for 0-2 years, mid-term goals for 2-5 years and long-term goals for 5-25+ years. The priority you give to each becomes important because that will help you decide which goals are to be achieved first.
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After you have adapted to a goal-based planning approach towards your finances, you need to keep a few crucial things in mind to remember:
Haste makes waste: Remember, when you are investing in goals, especially the long-term goals, do not calculate everything in terms of profits. Short-term performance is not the best indicator of your overall position. Think about it as progressing towards your goal. Sticking to your goal-based investment plan will allow you to spend a lot more time in the present rather than worrying about your future.
Know what your goals are: In a competitive world, we are always looking to match up to specific standards or commonly decide what’s right. Make sure the goals you determine for yourself are based on what you want. Do not listen to all the advice you get: Family, friends, insurance agents—everyone has an opinion on what you should do with your money, but that does not make it the best option.
Review your plan annually: In an ever-changing world, our priorities can also change. This makes it essential to continually review both short-term and long-term goals. Annual reviews are also a good time to go back to your portfolio to check if any changes need to be made.
Choosing a goal-based investment plan will not only help you achieve your goals, but also allow you to live a tension-free life. You will be in control of your savings, understand how your money is structured and know that your future is sorted. Besides, it will help your money grow towards what you really want.