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Sunday, February 24, 2019

Why Long-Term Financial Goals are Crucial to Saving

The best way to understand the importance of long-term financial goals is to imagine a scenario where your income is dwindling but your expenses aren’t.
Let’s assume due to a health or personal issue, you’re no longer capable of going to work. At that time, the money you’ve saved over the years will protect you from bankruptcy. But, if you didn’t save any money by opting for a long-term investment scheme or hiding money in a mattress, you’d face a scary financial crunch.

To avoid such situations, it’s important that you set financial goals and pursue them religiously. Here are a few more reasons to set concrete, long-term financial goals.

To secure your children’s future
If you have kids, then it’s important that you and your partner start saving from the time your children are born, if not from when they are conceived.
Education and living costs are always on the rise, and if you don’t start saving early, you might not be able to secure your child’s future. When they grow up, they may want to pursue higher studies abroad and, as a parent, you’ll be expected to pay the fees. To pay for your child’s dream, start saving in long-term investment schemes.
To save for medical emergencies

Life is unpredictable and no one knows when an emergency will crop up. It’s possible that you or one of your family members might develop a health problem that needs immediate attention, and a lot of money. In such scenarios, you can’t keep thinking about where to arrange the money from, because every second lost could worsen their condition.
When you start earning, you can either buy medical insurance to cover for your entire family and pay premiums regularly, or you can start saving money in investment plans of your choice, so that no matter what the emergency, you’ll always be prepared.
To keep a tab on your money
If you don’t have a long-term financial goal, you’ll never feel the need to prepare a budget. You’ll just keep paying for your expenses and saving the rest in a bank account, or spending it all by the end of the month.
Some investment schemes will demand you make installments periodically, and to ensure you don’t miss any, you will have to prepare a budget. Deduct your total expenses from your net income and whatever remains should be saved. This way, you’ll never be able to give in to binge spending because your extra funds will go into different investment vehicles.
To multiply your wealth
When you’re earning money, it’s not enough that you keep a certain amount in a savings account every month. If you can earn a lot more, why would you settle for less?
There are several investment schemes that can almost double your money over a couple of years. This would never be possible if your funds are just lying in a bank account. Instead, you should make sure that your hard-earned money gets multiplied over the years. Also, investing in various market instruments will help you save on taxes.

Now that you’ve learned why it’s important to have long-term financial goals, let’s focus on how you can set them.
How to set long-term financial goals
Your financial goals are unique and will depend on your requirements and financial standing. For example, your unmarried neighbour can invest in risky financial ventures as they don’t have any dependants. You, on the other hand, might have a family and so you will need to keep their security in mind. Therefore, your investment plans will differ from your neighbour’s.
Here are a few simple tips that will help you set and sustain long-term financial goals.
       Look for investment schemes that can meet your life goals. For example, if you’re saving up for your child’s higher education, then you should invest in instruments that will mature around that time.
       Decide why you might need surplus money in the future. Do you want to buy a house after 20 years or a retirement home? If your desire to achieve something is strong, you’ll automatically start saving for it.
       Think of the money you’ve invested as untouchable. You’re not allowed to withdraw it unless you have an unavoidable emergency. This way, you’ll not be tempted to pull out your funds.

       Make some investments in your spouse or a family member’s name. It’s easier to sustain such investments as you’ll not be able to withdraw money on your whim.

What are some good long-term investment schemes?
There are many long-term investment schemes that will help you earn huge profits.
Fixed Deposits
You can invest in a long-term Fixed Deposit scheme in a bank or an NBFC of your choice. Choose a tenure of 6 to 24 months and on maturity, re-invest the amount in another FD. Continue this cycle till you need the money to fulfill a financial need.
Public Provident Fund (PPF)

If you’re planning to save some money for your retirement, there’s no better way to do it than investing in PPF. You can start by investing a small amount and gradually increase it as you start earning more. By the time you retire, you’ll have a good-sized lump sum.
Mutual Fund
Investing in a Mutual Fund is one of the best ways of maintaining a long-term investment. You can invest a small sum but you’ll have to sustain it till the MF matures. Choose both high as well as low-risk assets while investing in an MF so that you keep earning profits irrespective of the market conditions.
Long-term financial goals will secure your future in more ways than one. You’ll not only have some extra funds for yourself but you’ll also be able to fulfill your family’s financial needs. Also, when you set long-term financial goals, you ensure that your hard-earned money is multiplied and not spent on unnecessary things. So, take a pen and paper, list out your long-term financial goals, and start investing now!

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