Have short term financial goals? Know how to address them
Recognising your goals, assigning target amounts to them and specifying the time periods to achieve your goals can have amazing results. Setting your goals, get you moving towards fulfilling them on time. Time plays a crucial role, among many other factors, when you are investing to fulfil your financial goals. Some goals are to be met shortly, say in the next 1 to 3 or 5 years, while some are to be achieved in the next 6 to 10 or 15 years or more. As Certified Financial Planner in Kolkata, we believe that your approach towards achieving your short term financial goals is meant to be different from your approach towards the medium and long term financial goals.
How to identify your short term financial goals?
While our needs can be unlimited, resources are limited. One needs to set and prioritize financial goals because addressing all your goals at once is practically not feasible. Personal financial goals are always subjective. What can be short term financial goals for you; can be long term financial goals for me. You need to be clear about your financial goals. Clarity helps you to avoid common mistakes and thereby you are in a better position to fulfill your needs within stipulated time. In order to identify and label your requirements as short term financial goals, you need to exhaustively consider various parameters.
Your financial status is unique. As Fee Only Financial Planner in Kolkata, we believe that your present financial position, your thoughts, views, expectations, importance and urgency are key indicators in determining your financial needs as your short term financial goals.
If you do not have a Contingency Fund in place, you need to focus on the same and consider it as one of your short term financial goals. Since Contingency Plan is one of the foundations of personal financial planning, you certainly need to have a financial provision to tackle unprecedented events in life. Otherwise, your journey towards fulfilling your financial goals will get disrupted.
If you do not have a health insurance cover, you should definitely get one as per your requirement and suitability. Considering your liabilities and family commitments, you should have a life insurance cover. “Insurance needs analysis” helps you to understand what sort of cover you would need. These should unquestionably be in the list of your short term financial goals to ensure financial security.
Credit cards debt is detrimental for your financial health. If you are having outstanding credit card(s) bill(s), it is prudent to pay off as early as possible because, credit card interest rates are usually as high as 40 to 42% per annum.
Self-education/ up-gradation may be a near term goal. You can start saving to meet your course fees and related expenses. Otherwise, it’ll be difficult to manage a lump sum amount when you decide to enroll.
Going on a domestic or international vacation and/or buying your initial car can be your short term goals. Buying a car in cash is what we, as Financial Advisor in Kolkata, recommend to our clients. Path towards avoiding auto loan is mutually predetermined by us and the client.
Home renovation can be one of your short term financial goals.
Family gifting can be one short term requirement. May be, one of your relatives is getting married. If you are single and wish to get married, you can consider your own marriage as a short term goal for that matter. You can make provisions for the same. Again, child-birth expenses can be a short term financial goal.
Apart from these, you may have other specific requirements which you need to fulfill in the near term. If you are in mid or late 40s, child’s higher education can be short term goal. If you are a pre-retiree, you situation is to be dealt accordingly.
Financial planning tools and processes enable us to do budgeting, cash flow planning and utilize the investible surplus towards prioritized goals.
Methodically addressing your short term financial goals is crucial
Factors to consider before investing for your short term financial goals
Different types of goals require different investment strategies. Short term financial goals should have a very clear path towards their fulfillment. You must know exactly how you’ll accomplish your goals. As Arijit Sen is a SEBI Registered Investment Advisor in Kolkata, we consider risk profiling as the cornerstone of our financial planning and investment advisory processes. Proper risk assessment is one of the crucial steps that lead to deciding suitable investment vehicles.
Factors to consider while choosing investment vehicles for short term financial goals are:
- Own risk profile;
- Nature of financial goal;
- Goal time-frame;
- Personal financial scenario;
- Available investment vehicles;
- Risks associated with investment vehicles;
- Taxation and inflation;
- Market scenario; etc.
Conclusion
Investing in equity products when you need money in the near term is not recommended. Investing in debt products has its own risks too. When it comes to investing, people usually consider only the return on investment they can get. They do not consider the risks accompanied to earn that return on investment. This is applicable to aggressive investors as well as conservative investors.
If you are being a conservative investor, your rate of return on investment is vulnerable to inflationary risk, re-investment risk (in falling interest rate scenario), etc.
If you are chasing return on investment, you are exposed to credit risk, duration risk, liquidity risk, etc.
Striking proper balance in investing within categories of an asset class for your financial goals is the key. As Investment Planner in Kolkata, we consider both aspects of capital protection along with the objective of capital appreciation while preparing investment plan for our clients.
