Setting your goals is the first step towards your vision of Financial Freedom. Planning your investments based on your life goals and time-horizon can help you tag your dreams most effectively. While equity mutual funds are the best long-term investment decisions, you can also manage your short term fund requirements and finances through the debt category.
Right from the start of your career, dreams are an essential part of your life-stages. From having a lavish lifestyle to owning a house or retiring rich, these dreams are essentially life goals that you plan to reach somewhere down in the future. Well, the goals might differ with each life-stage. But money is one thing that never goes out of the context.
Undoubtedly, to achieve these goals, you need to have financial resources, and yes a great deal of it!
Although we might dream of it, optimistically, none of us (primary income earners) cease to think about our financial situation. Not even so for a moment! So when life moves on from being a student to being a career-oriented individual to having a dream retirement, how can you achieve financial freedom is a big question? All of this when money matters never rest or desist!
Well, the answer is simple. INVESTMENTS & STRATEGY!
Having a plan is one thing. But, reality check - effectively executing such plan can be poles apart. Well, what if I told you that expert advisors with years of experience have the knack to help you prepare and execute your financial plan in a highly effective way. That too at zero cost. Too good to be true ain't it?
Well as unbelievable as it might sound, just a few minutes of reading can definitely help you pull off that financial success you're so eager to achieve.
The Need for Goal-Based Planning:
Setting your goals based on their time-horizon helps you in effectively planning your finances as and when you need it.
Say, for instance, you'll need 'x' amount for your children's higher education 20 years down the line. Now that you've figured out your requirements and a specific time-horizon, this can help you plan your investments to realize your financial requirements comfortably. Sometimes even before it's due!
So, here's a brief outlook of how you can time your goals:
(Note: This is a generalized investment approach. Our investment advisors offer personalized investment services based on your risk-appetite and time-horizon.)
- Emergency Fund a Basic Need of Every Household:
“When you become comfortable with uncertainty, Infinite Possibilities open up in your life.” — Eckhart Tolle
The very essence of this statement makes us realize that we need to prepare for any emergencies. We fear uncertain situations, be it a sudden health-related issue, unexpected job-loss or a family-related issue. Well, it's natural to have a sense of control but what if uncertainty knocks you off your game!
Having an emergency fund set aside for such unplanned situations can help you recuperate with confidence. The goal is to set aside a sufficient fund, say at least four months of your take-home salary as your emergency fund.
Now, for the most important part, an emergency fund does not necessarily mean you keep it in stashed deep down in your cupboard or deposit the funds in a dedicated savings account. For cash has zero growth opportunities while funds lying idle in Savings A/c might earn you a minimal 4.00% or even 3.50% nowadays! You can set up an investment in liquid funds that can help you fetch better returns of up to 7.00% while you allow your emergency fund to grow on its own by the day!
- Short Term Goals with Time Horizon of 3-5 Years:
A good six month run on your job without even a day's holiday. You owe yourself and your family a nice vacation. Well, every individual has short-term goals. A vacation to an Exotic Destination or Owning a Car and the likes.
Such short-term goals usually require anywhere between 4 lakhs – 5 lakhs within a time-span of 3-5 years. You should essentially start planning for such goals right away. Investing in debt funds is the best way to set aside the required sum. Assuming an annual return of 9.00%, you should set aside Rs. 7,000/- each month that will help you achieve your target of 5 lacs in 5 years.
- Long Term Goals with Time Horizon of 10-15 years:
At some point in time, you'll start thinking of big-ticket expenses. Marriages are a costly affair. Higher education for your younger ones. Dreaming for a place you can call home!
Taking up a loan for such expenses might sound easier but mind well, it becomes a costly affair later on. Planning for such goals early can help you realize a part of your fund requirement, if not make up for the entire corpus.
Determine each of your goals individually and basis your corpus requirement you can start investing in equity mutual funds that can fetch you a higher 12% returns per annum over longer periods.
Say you need a corpus of Rs. 1 crore, 20 years down the line. You should essentially strategize your investments and create a good mix of Equity Funds (Large-caps / Diversified / Midcaps). Start investing around 10k a month through the SIP route that will help you build a corpus that huge in your given time frame.
Retirement is one of the best phases of life. You ought to live your retirement king-size, live your dreams with your loved ones and have a time of your life without any worries of 9-5 routines!
If this is your dream, then planning for a dream retirement TODAY is equally important. Get your priorities right, measure your retirement dreams, make realistic estimates and deploy your strategy in the right mix of portfolio.
Since you have a higher time horizon of at least 30 years, you can easily choose a good mix of equity funds. Further, including the smallcap and midcap category funds in your portfolio can give you a taste of superior returns. Assuming a minimal 12% returns per annum over 30 years, a good mix of SIP portfolio can fetch a huge corpus of at least 1.8 crores. Ain't that enough to live your dreams?
So while you're at it, you should now find that achieving Financial Freedom is not invincible after all. Remember the expert opinion that we suggested at the start? Well if you did find this worthwhile your time, think what we can do with a personalized approach. Visit us at 5nance and start living your dreams today!