Wednesday, September 4, 2013

Savings Vs Goal Mismatch

Savings Vs Goal Mismatch

Here we will converse about Your Financial Goals Vs Kind of Saving Required,

Goals can be classified as :- 

Emergency money planning 
Buying a house
Buying a car
A holiday abroad
Retirement Planning
Education & Marriage Planning for Kids
Any other Financial Goal (owning / starting your own business) etc.,

One needs to match his/her financial objective to the correct class of investments they do. 
Isn’t that you think about all the time?

If yes, you start figuring out how to assign the funds you are earning to the right kind of investments for your current & future financial goal wishes.

Now let’s talk about your goals!

To decide where to allocate your money or how you can invest the money, one should consider short term / medium term & long term goals for self & family.

• Thinking of stop renting or buying a house in long run?
• May be you need to buy a car now? 
• Creating Contingency fund / Emergency Fund for any unexpected situations it may arise in future? 

And please, do not forget to invest for your retirement.

make a note of all your goals....write it down & make a list and prioritize the same. 

After you finish the list and the priority on the step is to put an estimated value on the same, the estimated value does not need to be the precise amount, but you should have an idea about the estimated value at least, like your requirement of estimated money you will require when your kids will go to school / college. Right? How much you will require when you will retire? What will be the inflation rate when you aim to retire? Once you will have this list ready on paper with all the details, set a timeline for each event. May be your retirement is several years from now and you want a car in next 1-2 years right?
Match your assets with your goals

Short term goals-allocate your money in short term funds / liquid funds for a period of days and months.

Medium term goals – allocate your money in medium term debt funds (maturity of 1-3yrs or in a Bank FD.

Long term goals – like the name suggest, its long term...generally 5 year plus money, you can assign the funds to Equity & Balance Funds, so you can take an advantage of Equity returns + dividend Income & off course, this will beat the price increases (inflation) in long run.
This all is not a onetime process, this needs to be look / re-look at time to time, the reason is...when you are in your 20’s & 30’s you take more risk in equity to earn and extra returns, and less of equity allocation in your 50’s and 60’s.

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this above article is published in Proteus Magazine September 2013 issue,
you can download the entire Magazine. click to download the magazine :-