. However, if you have sleepless nights when the value of your portfolio takes even a small dip, you are not a risk taker. The kind of risk that you can take will determine the type of financial instruments in which you can put money.
readers have posted queries on approach they need to adopt to set their financial goals and work towards achieving them. Typically, financial goals depends on the life stage one is in. For instance, over one’s life one will have goals like buying a house, car, go on a family vacation, save for children’s education and one’s retirement. Although these needs are fairly universal, yet, each individual’s goals would vary depends on the money needed to achieve them and time to reach each goal. Whatever is the stage of your life or circumstances, the process to achieve any financial goal is the same.
start by writing down your current financial situation. This could be by listing all your current assets and its monetary values and any liabilities that may have by way of loans and outstanding sums you may be owing to anyone. This is the most important step and if have a budget, it would be easy to get it all on paper. Write down your income, expenses, existing savings and existing investments with value to each of these heads.
State your goals
You should state all your financial goals and assign them a value and timeline by which you wish for it to materialise. Once you have the list, you can bucket them under different heads—short, medium or long-term. For instance, goals like purchasing an LED TV in three months is short term; family vacation that is three years later is a medium-term goal and your child’s education and your retirement are long-term goals.
You need to now ascertain your comfort to risk, which is nothing but how much risk you can take when it comes to investing
Link savings and investment option for each of your financial goals. Doing so will ensure you not mix your investments and are unable to prioritise funds for the many financial goals that you may have. This will also help in the selection of the appropriate financial instrument in suitable asset classes. Choose investments based on their tax efficiency and not be blinded by returns. For instance, you can deploy money in equity-oriented instruments to achieve goals that are over 5-7 years from now. Alternately, if the goals are between 2-3 years from now, you could look at parking money into debt instruments.