In order to reach major milestones such as purchasing a car, taking a vacation, or servicing loans, setting achievable short-term financial goals is crucial. A well-planned approach involves defining one’s priorities, formulating an action plan, and selecting the right tools to save money. In this excerpt, I will demonstrate how to set and realize your short-term financial goals effectively.
What Are Short-Term Goals?
Generally, short-term goals can be categorized as goals that can be accomplished within a year or less. A few illustrative goals include:
- Down payment for a new car
- Funding an international holiday
- Saving for marriage expenses
- Creating an emergency fund
- Repaying credit card or student loans
- Starting a small side business
How To Actually Achieve Short-Term Goals
Identify What Matters Most
The first step is determining the most important goal that you need to achieve. This could range from something as critical as education to a more mundane goal like a vacation or even purchasing something big. With this in hand, you would know how to strategize your financial planning.
Set A Definite Timeframe and Budget
Nail your goals down to specifics so that you can set deadlines as well as monetary targets. For instance, if you wish to go on holiday and save Rs. 2 Lakh in a year, set specific milestones for each component of the trip, such as airfare, accommodation, and so on.
Focus On Your Objectives
In the case where there are various goals to achieve, one has to rank them in order of urgency. The first goal will be completed first, after which one can move on to the next.
SMART Goals Framework
Goals remaining clear and attainable is the essence of the SMART goal strategy. According to this strategy, every goal should be:
Specific: Any goal has to be precise and unambiguous.
Measurable: You should be able to track progress with a set amount (e.g. Rs. 2 lakh) or other indicators.
Achievable: Achievable is what we term as realistic concerning one’s finances.
Relevant: The term relevance refers to how well the target goal would aid in achieving one’s long-term goals.
Timely: Goals that are set without timelines often lead to procrastination.
Tips to Follow When Trying To Achieve Short-Term Financial Goals
Start Saving
Start simple Recurring deposits with the savings account linked to your salary to earn compound interest so that your wealth increases while you are saving.
Cut Spending
One of the simplest ways to save more revenue is by eliminating Mel unnecessary spending in the longing. Prioritize non-target purchase and attitude as savings.
Investing in Short-Term Debt Funds
Investments in short-term debt funds can be a good piece of decision-making when it comes to investing for a goal that is within 3 to 12 months, especially when compared to equities. Investing in short-term debt funds has less risk than investing in stocks because the average return in these funds is around 6-8% almost every year.
Where to Buy Short-Term Debt Mutual Funds
The following websites allow the purchase of short-term debt mutual funds:
- Moneycontrol
- Economic Times
Such websites provide a number of options in short-term debt funds from well-known asset management companies like:
- HDFC Mutual Fund
- Aditya Birla Mutual Fund
- DSP Mutual Fund
- BlackRock Mutual Fund
Benefits of Planning Financial Goals in One’s Life
Financial goals are helpful for objective specification and make attaining the goal simpler.
Budgeting & Extra Saving
Goals make it easier to plan, by restricting expenditure, thus enhancing bulk savings to achieve set targets. This helps accomplish the defined targets.
Disciplined Investment
Stated goals motivate structured investments in the defined timeframe whereby one is required to allocate a fixed amount to various investment vehicles like mutual funds, real estate, or stocks.
Debt Reduction
Having defined goals for the short term helps in focusing on paying off loans to cut the debt and gives a financial cushion to achieve long term goals.
Tax Benefits
Part of your goal-based plan could involve investing in tax-free avenues with the dual effect of saving taxes.
Reduced Stress
Besides, working towards your goals should give you confidence and alleviate at least some of your anxiety since you are on your way to achieving your financial goals.
Final Remarks
Achieving short-term financial goals can be more efficient if you adopt the SMART approach to goal setting. Begin by considering cutting back your spending and saving a portion on a regular basis. Also, retail investing in conservative funds such as short-term debt funds. With this style, you are likely to fulfill your short-term objectives and have a secure financial background, along with, an optimistic long-term outlook.
