What's Your Financial Priority
Everyone is unique. It is likely that your financial perspective differs from mine. No one has the same bills, rent, debts, or lifestyle. What is important for one person varies from another, this is a given. However, I believe that there are several common themes like what we have presented earlier: achieving financial stability and living within your means might be a good a priority.
In setting out your priorities, you must determine your financial goals. A financial goal is your target as your benchmark towards realizing your financial goals when managing your personal finances. It can involve saving, spending patterns, earning or even investing. When you have a deliberate financial vision, working towards your goals is easy. That means you have a road map in hand and a dashboard.
There are usually three types of financial goals:
These would primarily be your 12 months' financial targets. These might include things like getting a new smartphone, paying down your credit cards or donations.
Normally mid-term goals will set out your five years financial perspective. This would probably be a more sizable purchase like getting a car or clearing off your credit card debts entirely.
This would be your ten year financial plan. For example, this could be your strategy in setting aside enough money to buy a house or a piece of land in the countryside.
How Do You Decide On Your Financial Goals?
It is vital you assess your current financial position. Are you in good shape or in terrible shape financially? If you are in an awful shape, your priority is to fix and solve your financial woes. Because nothing else would matter. It is pertinent to be realistic in our perspective when setting our goals. Nobody gets everything they wish for in life. That’s why we need to determine our priorities and make the right choice. We must establish clear priorities as our financial goals. Having set a clear priority can be a big significant change financially for your and life-changing experience at the same time. Your decision on what to focus on, what things mean to you and what you are going to do about them will determine whether you are going to turn your financial goals into reality.
Let’s consider several of these questions to diagnose your financial position.
If you are working in the Hotel industry, which was badly hit during the Pandemic chances you might get laid off or get hit with a painful household expense, do you have sufficient cash reserve to sustain the blow?
What would you do if you don't have an emergency funds or enough savings to handle the unforeseen money crisis?
Most people in that situation would probably put the expense on a credit card, borrow the money from family or friends, or sell something to generate the short-term cash requirement. Some would go for a bank loan. Still there are some that could not pay for the expense by any means.
Such a money crisis can occur in the blink of an eye. You don't want to be caught by it. We will never know what the future holds for us, so it's wise to be prepared.
Short Term Quick Win
It's vital to set up an emergency fund as your short-term goal. I will set aside US$100 a month. In one year, your emergency fund will grow to US$ 1,200. That's often enough to cover a repair bill or emergency travel. Such an emergency fund will protect you from the excessive cost of borrowing or put your close family and friends in an awkward position.
I would recommend that you have this as your financial priority in the short term. This will be a great quick win.
Mid Term Goals
Mid-term financial goals might be a goal that will require more strategic planning and a much bigger financial commitment than short-term goals. I think the following would be good examples of a mid-term financial goals:
1. Saving for a home down payment
2. Invest in a Unit Trust
3. Pay off your car debts in full
Long term financial goals will require discipline and strong will. It's easy to get distracted simply because it takes a longer time for you to achieve it.
This will be like your emergency fund but with a bigger monthly commitment over 10 years period. Examples of long term financial goals include:
1. Saving for a child's college education
2. Investing in a retirement fund
3. Paying off a mortgage
It's essential to determine the magnitude that you intend to set aside and save over the 10 to 15 years' duration. Establishing your financial goals and developing a force saving scheme is the first step to realize your financial freedom. You must be precise in what you want to achieve. For instance, for your mid-term goal you must commit to save US$500 for 60 months. With US$ 30,000 should be sufficient for you to pay for the house down payment.
It's important to identify your source of inflow that will contribute towards your monthly commitment. You must be realistic, otherwise it will not happen.
Setting your short to long term financial priority is a fantastic step towards establishing financial stability for you over the long run. But we must have a crystal coherent plan to back it up. Cutting back on excesses and creating more passive income channel can be another way to reach your financial freedom objectives.