Life is full of challenges.
Of the many challenges that life puts before you, one of the challenges that most of us are confronted with is managing our personal financial goals.
Most of the times, it happens that you do not have a single financial goal; rather you have to deal with multiple financial goals. You have to do your retirement planning, save for your children education, buy a home, save for a vacation, and of course have many other financial goals, as well.
Really, this is a big challenge for you.
You invariably are confused how to manage your multiple financial goals.
However, like every problem has a solution, this problem too has a solution.
You just have to know how to save for multiple financial goals.
Yes, the solution lies in knowing how to save for multiple financial goals.
While some may argue that this is not possible, but the fact is that saving for multiple financial goals is very much possible. Although at first, it may look like a daunting task, a complex one to fulfill, but I would like to assure you that if you follow the right method you will surely succeed in saving for your multiple financial goals.
So, let us see how you can save for your multiple financial goals.
As a first step towards saving for your multiple financial goals, you need to write down all of your personal financial goals that mean the goals for which you would like to save. Next you need to figure out the amount of savings required for each of your personal financial goal. Then you also need to set up a time frame within which you want to see your financial goals accomplished.
A typical multiple financial goals list together with estimated amount of savings and time frame would look something like this –
- An iPhone 5 for $600 in next three months. So you need to save $200 per month.
- Family Vacation for $4000 in next eight months. So you need to save $500 per month.
- House Renovation for $6000 in next twelve months. So you need to save $500 per month.
- Buy a new car for $15000 in next thirty months that come to saving $500 per month.
- Down payment for a new House for $30,000 in next sixty months. So you need to save $500 per month.
If you go by the above example, you would require saving $2200 per month. As the above financial goals are short term goals, the instrument you choose for saving should be safe and accessible to you. So you should avoid investing your money in equities as the time limit is too short to absorb and recover from market fluctuations.
The simplest way to save for multiple financial goals is to open up a savings account in a bank and then create savings goal within that savings account. You can also open separate savings account for each of your saving goal. Additionally you can link your savings account to a regular checking account and facilitate automatic transfers so that it becomes easy for you to fund each of your savings goals or specific saving accounts. It then becomes simple to save for multiple financial goals.
Now, let us take the scenario when you are not able to save $2200 per month.
How would you then ensure that you still meet up your multiple financial goals?
Suppose, for example, you are able to save only $1000 per month. Now you would need to prioritize your saving goals. You have to figure out which savings goals can be postponed for a while. So then you can allocate your savings on a monthly basis to rest of your savings. As you go on achieving your goals, you can take the remaining financial goals, as well.
So if you have postponed goal number 4 and 5 (as listed above), you can begin by saving $200 for iPhone, $500 for a family vacation, and $300 for house renovation in the first month. Once you have saved for iPhone, you can take up the next saving goal that is buying a new car.
There’s a second approach too. You can focus on the saving goals chronologically. In this approach, you allocate fully $600 for iPhone in the first month and the remaining $400 for a family vacation. Over the next three months full, $1000 would go towards fulfilling the second goal. In the fifth month, you can allocate $600 towards family vacation so that it is fulfilled and the remaining $400 for house renovation. This way you would be able to move closer towards fulfilling all your five goals.
So this way, you can successfully save for your short term multiple financial goals.
However, for long term multiple financial goals you need to adopt a different approach altogether. Long term financial goals can be in the form of your children college education, retirement planning and things which require you to save continuously for a long period.
For these types of financial goals, you require to create a separate portfolio for each of your long term financial goals. Rather than savings your focus should be on investment. In order to meet long term financial goals, you should create a diversified portfolio. You can include equities, mutual funds, government bonds, and debt focused funds.
Like in the short term financial goals, you should be clear of the amount and time frame for long term financial goals. For a long term of twenty to thirty years, investment in stocks can come out as a viable option. Here, one thing is important for you to remember. You should not overreact to daily market events such as market downturns, or interest rate fluctuations. If you stick with a stock for long term, it is likely to give you good returns. However, if you are not a risk savvy person, then mutual funds and bond funds can be a good choice for you. Mutual Funds and Bond Funds give you the advantage of diversification and hence you get a wide range of markets and bonds. Yes, it is important for you to research the stocks, mutual funds, or bond funds before finally making your investments. It would be better for you to take the help of an experienced financial advisor for selecting the right stocks or mutual funds for you.
So you see that you can very well save for multiple financial goals. You just need to adopt the right approach and method for saving for multiple financial goals. Moreover, you have to ensure that you continue saving till you have achieved all your financial goals. Following the tips and suggestions given above you get to know how you can save for your multiple financial goals. Then it’s a matter of implementing them to ensure that you achieve all your financial goals.