Binge shopping, going on spontaneous vacations or sending your child to a university abroad: our life goals are as diverse as our personalities. While many of us believe in ‘seizing the day’ and live to fulfill desires as and when they come, there are others who are willing to go the distance when it comes to accomplishing their dreams.
Regardless, there is one unifying factor that ties most of these goals: money. You need to save money to support your child’s education, buy a house and practically, fulfill every other need. In other words, saving towards specific goals or dreams is crucial.
Also, it is only when you get down to planning your finances for a particular goal that you can identify and address the complexities, thus making sure that nothing comes between your dreams. Here’s how you must plan your savings in simple steps that will take you closer towards realising your goal.
Step one: Identify your goals, make a list
Although identifying the goal may seem an effortless task, it is the first and most crucial step in your financial planning. Each life goal is distinctive, be it education, marriage or retirement. Hence, you need to list down your short-term, long-term and even less important goals.
It could be an expensive anniversary gift for your spouse or a cruise trip on the New Years’ eve. Whatever may be the goal, if it’s important to you, it has to be on that list. After that, you need to distinguish your short-term goals from the long-term ones and decide on a timeline for them. Subsequently, you may prioritize your goals and determine which ones need your immediate attention and which goals may be pushed further down the timeline, depending upon their importance.
Step two: Quantify your goals, envision a lifestyle
The next step is where the financial aspect of planning comes in. Merely knowing that you want to retire by the age of 55 is not enough. You must also envision the kind of lifestyle you want to be able to sustain after your working days are over.
Thus, for every goal, you must determine the approximate amount of money you will need to accumulate. For example, if the goal is education, you will have to estimate how much it is going to cost.
You need to figure out the amount by considering today’s value and the rate of inflation. You may assume the inflation rate for the long term to be 6 to 8%.
Step three: Maximise savings through investments, work towards a life goal
Once you have assessed how much money you need to accomplish your life goal, you need to allocate a portion of your monthly earnings for your goal. But savings alone would not do the trick. Instead, you need to maximise your savings by investing them in a high-yielding investment plan.
You may choose from a variety of market-linked tools such as ULIPs, retirement plans and child education plans. Some of the best ULIP plans available today offer high long-term returns on your investments while securing your accumulated wealth with life cover protection.
Not only this, best ULIP plans from reputable insurers such as Future Generali provide significant tax benefits on the invested savings amount and the maturity proceeds. Moreover, you can tag these investments for different life goals, and as your savings increase with time, you may allocate some money towards an emergency fund.
Step four: Build an investment portfolio, strike the right balance
Depending upon how far or how close your goal is, you must shake and stir your portfolio to include varying proportions of equities and debt fund options. For example, if your goal is a long term, you must allocate a significant portion of your money into equities and let it grow.
On the other hand, you should invest your savings into lower risk elements such as debt funds or FDs, for short term goals. Doing so, will not only help you grow your money but will also allow you to secure your investments from the volatilities of the market.
Overall, you need to choose the right set of investments depending upon your risk profile and the number of years left to achieve your goal. With the right balance between the two factors, you can be sure that you are not taking too many risks or falling short of your goal because of insufficient finances.
Step five: Lay down a savings blueprint, accomplish your life goals
We all know some life goals such as retirement or education will undoubtedly happen. Therefore, it is crucial that we start planning for them well in advance. Identifying goals, laying down a blueprint for accomplishing those goals, and planning your savings are essential for significant milestones in your life. Being prepared will not only secure your finances and give you peace of mind but will also
allow you to tackle any unforeseen contingency.
For example, when you include a ULIP plan into your portfolio, it provides you high investment returns along with comprehensive life coverage, thus allowing you to maximise your savings while protecting them from any eventuality. Remember, the key to increasing your savings and accomplishing life goals is to be committed and disciplined to your money goals!