From buying a phone to planning your retirement. From planning a two-day trip to buying the house of your dreams - we all have such aspirations but how do we go about turning them into reality?
The answer is simple: SAVINGS!
Being smart about your expenses and making goal-based financial decisions can help you achieve your dreams with increased financial stability.
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Decide Your Saving Goals
Saving goals are the targets that you set for yourself and then plan how to achieve them. Every person has different saving goals like taking a vacation or buying a house or even planning for retirement. These all are goals for which you can immediately start a savings plan.
Types of Saving Goals
Saving goals can be divided into three groups:
- Short-Term Goals: Goals that require almost immediate action are short-term goals. They are mostly repetitive and are addressed at frequent intervals. The best way to achieve these goals is to make a budget and strictly adhere to it. With the 0-2 years’ tenure, the best investments one could make for such goals are: Savings Account, Fixed Deposits, Debt Mutual Funds, etc.
- Mid-Term Goals: Goals that overlap short & long term goals are mid-term goals. These expenses are more expensive than small ones but achievable with planned efforts. With a 2-5 years tenure, these goals can best be achieved with Fixed Deposits, Debt Mutual Funds, Gold Investments etc.
- Long-Term Goals: The money one needs to save for retirement is an example of a long-term goal. It’s always a good idea to start saving for it in the early years. With more than five years of tenure, the best investments for long-term goals can be Equity Mutual Funds, Real Estate, etc.
You can read more about How to Set and Reach Savings Goals here.
How to Achieve Your Saving Goals?
- Set S.M.A.R.T Goals: Whether you have small dreams or lofty expectations, setting goals allow you to plan how you want to move through life. Some achievements can take a lifetime to attain, while others can be completed in a day. So set S.M.A.R.T goals - Specific, Measurable, Achievable, Realistic and Timebound.
- Break the Bigger Picture Down: Saving goals can be classified into three groups - Short, mid-term and long. With each plan, you will require different mechanisms. Begin to ask yourself questions about what you'd like to achieve in each area and how you would like to approach it within a five-year time frame.
- Make a Monthly Budget: Create monthly accounts for yourself and keep track of whether you are sticking to them or not. Make three divisions, one each for your income, expenses and savings. It is a great way to plan your costs and help you achieve your financial goals much faster.
- Invest Wisely: The number of people investing in the equities market has increased dramatically after the lockdowns. If you are looking to invest and save for retirement, start now. If you have trouble understanding the stock market, do not invest directly in inequities. Only invest in instruments that you clearly understand so that you can plan a portfolio that best suits your financial needs.
- Adjust Your Goals Periodically: The essential part while doing financial planning is reviewing once in a while. Analyse the progress, check if your goals are meeting the time frame you have set. If not, re-align your portfolio where necessary so that there is no shortfall when the goal is near.
Goal-based savings are important and allow you to manage your money properly. The different goals cater to different life situations and needs and must be addressed accordingly. Keep all the points mentioned above in mind and begin saving for your financial goals.
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