Every individual must have thought of saving for the future at least once or twice in their lives. The question that strikes our mind is why is it important to save. Why the need of planning for the future is increasing every day? So the answer is that lives are surrounded by uncertainties, and the government is changing policies every day. The pension schemes have been reduced and the trend of working for multinational companies is on the rise. Consequently, there arises a need of setting up financial goals and targets. There arises a need of deciding rules and setting some financial goals to be achieved.
Need of setting up financial goals:
What is the need of setting financial goals? Goals are long-term plans or targets to be achieved. So if we think of the reasons for setting up financial goals is to secure the future. Money reserved can help in surviving in the future. It can help an individual in planning budget and managing expenses. It can also help to save the amount for emergency or unexpected situations. It can contribute to comfortable or luxurious living in the future. It awakens an individual to the need of managing resources and saving for retirement survival.
Strategies for setting financial goals stage-wise:
Depending on a person’s circumstances, obligations, and desires, different stages of life have varied financial goals. Following are some typical financial objectives during various life stages:
- Early Adulthood (20 to 25):
Set aside money for emergencies that will last three to six months. Get rid of high-interest debts like credit card balances and student loans. Even if it’s just a small amount, start making contributions to retirement savings accounts. Secure money for short-term objectives like tourism or higher education.
- Young professionals (25 to 35 years old):
Building the emergency fund should be done while aiming for a bigger reserve. To benefit from compounding, increase retirement account contributions. Save money for other important investments, such as a down payment on a home. Begin purchasing inexpensive index funds.
- Family building years (Ages 35–45):
These are the most fundamental and crucial years of life. In these years of life, one must prioritize education funds for the kids, such as a college savings plan. To safeguard the financial security of the family, review insurance coverage, particularly life and disability insurance. To lower interest payments, think about refinancing your mortgage or consolidating your debt. To guarantee a stable retirement, increase your retirement contributions.
- Ages 45 to 55: Mid-Career
By this age, an individual becomes more mature, able to take decisions, and moving towards the retirement age. At this age by increasing payments to retirement accounts, you can, if necessary, catch up on your retirement savings. As retirement nears, review investment plans to balance risk and protect capital. To protect yourself from potential medical bills, consider your alternatives for long-term care insurance. To expand your investments, think about including real estate or other non-traditional assets.
- Pre-Retirement (55 to 65 Years):
Multiple factors are responsible for your retirement age decision. The government may fix an age for your retirement, your health record or history or your own mental well being. Set a desired retirement age and income level, and complete your retirement planning. To lower risk and provide stable income, review and modify the retirement portfolio. Pay off all outstanding debts, including the mortgage, to reduce retirement expenses. Think about downsizing or moving to a more affordable residence.
- Retirement (at 65 or older):
Once you are retired or reached a retirement age it is a time of enjoying the privileges for which you saved. To secure a stable income throughout retirement, implement a withdrawal strategy for retirement assets. Observe the plan changes, updated plans available, and modify the retirement plan as necessary to reflect new circumstances. Concentrate on estate planning and setting up a trust or will to disperse assets as you see fit. Keep long-term care requirements and healthcare expenditures in mind.
Thus, we can think of a safe and secure future, if we can save and plan for after retirement age. These are the different stages that work as a guide. It is always wise and advisable to think of a secure future. It is never too early to start saving and planning your income and resources. If you save better your chances of having a privileged retirement period are better.
