How to plan and reach your financial goals?

We all have dreams that we would like to fulfill one day and financial goals that we would like to achieve. For some, it is owning a house or providing their children with the best education possible. For others, it could be traveling around the world. These dreams will come true when we are financially secure and have the freedom to follow our hearts. In order to achieve this, it is important to list your financial goals and grow your money to its full potential. While a life insurance or a ULIP (Unit-linked Insurance Plan) is always a great idea, you need to first understand the best way to plan your financial goals.

Planning financial goals

Before you plan your financial goals, it is important to identify your spending patterns, make a note of expenses that can be foregone and plan ahead on how you can save more money.

The three important steps to plan your financial goals are as follows:

i) Understanding your risk appetite and risk profile

Your dependents, your age, your monthly expenditure, your current financial commitments (including loans) form your risk profile. Your risk appetite is your willingness to expose yourself to high risk (eg: small-cap funds) and low-risk investments (eg: Fixed deposits) which bring different yields in the future.

ii) Classify your goals

The second step is to make a list of your goals and prioritize them. Classify your goals into critical, essential and nonessential. Further classify the goals into short term, medium term, and long-term goals. Your travel plans can come under short-term goals whereas planning for your retirement would be a long-term goal.

iii) Estimate investment size

Once you have your list ready, the next step is to make an estimate of the amount of money that needs to be allocated to your goals. For your long-term and medium-term goals, it is important to keep inflation in mind.

How to reach your financial goals?

Once you have identified your financial goals, the next step is to begin working on a planned investment strategy. Follow these steps:

i) Asset allocation: Your asset allocation strategy would depend on the duration of your financial goal.

  – Short term goals: Savings account, Liquid Mutual Funds, Recurring deposits and short-term fixed deposits are some of the investment products that are recommended for your short-term investment goals. Fixed maturity plan mutual funds or short-term debt funds are other options.

 -Medium Term goals: Debt oriented hybrid schemes and equity-oriented balanced funds are instruments that provide steady growths for your medium-term goals. The returns may not be exceptional but there is good growth and low risk.

 -Long-term goals: ULIP and equity mutual funds are recommended for your long-term goals. Life Insurance cover is also recommended to keep your family protected in the long term.

ii) Monitoring your financial investments

Your work doesn’t end once your investments have been made. It is important to keep a track of the growth of your investments. Make time every quarter to carefully go through your portfolio and make the necessary changes.

iii) Revisiting your financial goals

As the years go by, the needs of your family may change, too. It is important to revisit your financial goals every three years to ensure things are going on track. Don’t hesitate to change your financial goals if the need arises.

I would like to end by introducing you to Aegon Life Insurance: It launched its pan-India operations in July 2008 with a vision to be the most recommended new age life insurance Company. Aegon is one of the world’s leading financial services organizations (providing life insurance, pension plans, and asset management) and Bennett, Coleman & Company (India’s leading media conglomerate) have come together to launch Aegon Life Insurance. This joint venture adopts a local approach with the power of global expertise to facilitate a direct to customer approach, leveraging digital platforms to bring transparent solutions to customers and to prioritize their needs.