Financial goals will give you a path on which you just have to walk over time because you have decided and planned everything in advance. Financial goals are about stability and consistency.
No matter what life stage you are in, you should have some short and long term financial goals. Setting stable and realistic goals, following them, and tracking your progress is the key to success in achieving all of your financial goals.
List out all your financial goals in the order of importance, and then decide how long you have to save money to achieve each of the goals.
Your goals can be dreams or wishes and you must have an action plan on how to achieve these goals. An action plan is very important to convert your dreams into reality.
Set-up a well-stocked emergency fund
Creating an emergency fund should be a short term financial goal. Try to save at least ten months of your income as your emergency fund.
The action plan to reach this goal is very easy. Start saving small amounts and keep on doing it without any fail.
It will take out a lot of financial worries that you have as you know that you have important long-term benefits, which is why it’s one of the good financial goals that you should plan to achieve.
A well-stocked emergency fund will act as a defense in the event of sudden blow such as, a job loss or a huge medical expense. It maintains balance in your life during any ups and downs in your life.
Create a new savings account and automate to flow a certain amount from your savings into the account so that you don’t forget and over a time period you see money accumulating into the account. Try to get an account that pays more interest for the savings account.
Get Out of Debt
Being in debt is a very stressful experience. If you
want to make use of your earning to full potential, you have to get out of debt. It’s a great feeling to have full control over your finances.
If you want to get out of debt, stop spending money on luxurious outings, designer furniture and other things you actually do not require. You have to make some financial sacrifices.
Try to change the habits that brought you financial troubles. Face up the amount that you have to pay to get out of debt and create an action plan accordingly to pay if off.
Try to find an alternative source building a passive income source to make some extra money to pay off your debts quickly.
Create a Passive Income Source
Active income is the money that you stop receiving as soon as you stop working. If you quit your job or fired you’ll stop getting paid. The emergency fund you created can support you for a couple of months but eventually you will lose financial balance in your life.
With passive income you can make money whether or not you do any work. You have to work in the initial stage a lot to start generating income but later it becomes easy and the money keeps on flowing.
Passive income is not a lump sum amount that you get one time by selling some asset or some stocks. With passive income there has to be continuous flow of money with very less effort on the income source.
Create a multiple income sources to have a financial security in your life. With passive income flowing in constantly you can plan for early retirement. If you like travelling like me, you can plan a some exotic vacations with your loved ones. You can quit the job that you don’t like and start a business that you are interested in. It can help you to pay off your mortgage or any debts.
A lot of people don’t have insurance and many others just end up paying a lot of premium for the coverage they have. If you already have insurance, take a look at how much you are paying for the coverage and now is the time to review that. It is very important to maintain balance with your insurance.
A health insurance provides you peace of mind in case of any medical emergencies or else you end up paying from your emergency fund or you go into
debt. The insurance provided by your company is not good enough to cover your medical emergencies. It is advisable to have a personal health insurance.
When you are thinking about life insurance, you better take term life insurance. Term life insurance is cheaper and you will get as much as 10 times more coverage than endowment plans or other life insurances.
Always spend less than what you earn
This is a basic rule for financial balance. Plan and spend money less than what you earn. If you spend less than what you earn, you will have money for savings, investments and to pay off your debt.
The problem a lot of people face to credit card debt. At the end of the month, when you have to pay the credit card bills, you will realize that you have spent a lot more than what you have earned.
Avoid payment with credit cards. For me, credit cards are only for emergency, where it takes a few days to liquidate your money. Avoid using credit cards for one month and you can see the difference on how you spend the money.
Understand what you want and what you need. I am not asking you to make sacrifices on everything. Understand what really brings meaning to your life and what does not and you will definitely spend less than what you earn.