Personal finance is all about the management of one’s money, investment, savings, and spending.
Personal finance goals are the core of personal finance, which helps individuals to make effective plans about their earnings, spending, savings, and investment.
These goals guide an individual to avoid financial issues, develop a budget, and make sure life goes smoothly.
These goals can guide you in personal and family member educational plans, career development, daily expenses, retirement plans, and personal development.
Research has shown that personal finance goals have strategic significance in the life of an individual.
This post covers the strategic importance of personal finance goals and the top 7 personal finance goals for individuals and households.
Importance of Personal Finance Goals
Personal finance goals are highly important for individuals as well as the whole family. These goals provide a well-defined way in improving one’s wealth, and organising desired funding for personal, educational, professional, as well as family expenses.
As per the nature of these goals, you can reduce expenses, increase savings, and improve overall finances. Personal finance goals can help you to reduce unnecessary spending, make proper personal payment schedules, pay loans on time, and support your family.
If you avoid developing personal finance goals, then a number of issues will arise.
These issues include a shortage of funds at month-end, failing to pay utility, medical and food bills, and increased risk for the future.
These issues have a great connection with the personal and social development of an individual.
If you fail to develop personal finance goals, then you can face different personal, social, and psychological issues.
If you want to have an easy life, achieve your goals and plan to increase your income, then finance goals are very crucial for you. There is no doubt that planning requires some time. But this time can decrease the hurdles in your life and guide you to achieve the monetary goals of life.
Top 7 Personal Finance Goals
Devise Budget Plan
Budgeting is very crucial to manage expenses and save money for the future. A possible budget plan is outlined below. However, you should investigate what works best for your goals and future.
The budget could be devised in the following way:
- Keep 50% of after-tax income for living essentials including rent, grocery, food items, utilities, and transport.
- 30% of after-tax income should be kept for different lifestyle expenses which include dining out, parties, gatherings, and shopping
- 20% of after-tax income should be saved or invested.
Devising a budget can help you live your life within certain limits and avoid unnecessary expenses while considering the future of yourself and your family.
If you do not set a budget for living essentials, lifestyle, saving, and investment, then you can face the problem of a shortage of income at any time. In that case, you will have to opt for credit or a personal loan from a family or friend.
Create an Emergency Fund
An emergency fund is very necessary for everyone because it directly helps you to have some funds for an unforeseen event. What could constitute an emergency may be anything.
It could be unexpected car repairs, medical bills, and family financial problems. In case of emergency, funds can be the best choice for you to utilise and meet your needs.
Consider Your Family
Personal fund management, property, finances, and other assets are very crucial for you and your family. You should consider family, different family-related expenses, living will, and power of attorney while developing the plan. For that pursuit, you are should develop a detailed budget, and plan assets transfer to heirs in case of death when considering a family. It means family consideration is the core component of developing personal finance goals.
Develop a Loan Payment Schedule
Repaying a loan on time is highly advantageous, making extra payments are even better. A loan payment schedule assists individuals and households to make loan payments on time. Loan payments on time improve credit rating, reduce the burden, and improve the overall life of an individual. Making extra payments can reduce the interest you pay on the loan over time.
Increase Sources of Personal and Business Income
Increasing sources of personal and business income can help an individual and family to increase their wealth. For an individual to make a good living, it is necessary to invest in shares, property, and business. Investing in different sources can directly increase the personal and business income of an individual where this increase in income can increase the overall wealth of an individual. If you want to increase sources of your income, then you need to invest after thorough analysis in shares, property, and bonds.
Develop a Retirement Plan
You may believe that retirement is far away, but it will happen sooner than you think! If you plan for retirement, then it can facilitate easy and smooth life for you. Experts suggest that each person should save some portion of their salaries or income for retirement. As per the nature of the retirement plan, it can help you to generate the desired pool of funds after you retire which will create ease for you when you will be older or unable to work. Additionally, retirement plan funds can help you to go on a long vacation after you retire and enjoy life.
An individual must develop personal finance goals because these goals can help you to spend and save for the future. If you fail to develop personal finance goals, then you face the problem of money shortage at any time.
In modern times, various free application tools are available on PC and smartphones to develop personal goals. These tools can assist you to predict possible future financial issue and plan for the future. We will review some of these applications in our next article.