Prioritizing Investment Channels
Have you started earning recently? And paying down your student loans, do you want to have a brand new car? Or is it owning your dream house in your bucket? At the same time, you may dream of a vacation.
So is it possible to have all these at once? Definitely no! How can you possibly save for multiple goals at once? But you can achieve all these step vies by prioritizing your investment.
Creating savings goals is one of the most effective ways to save money. Setting goals gives you defined reason to save as well as it keeps you motivated. Most of us save money but not for a defined goal, this ends up by using that money for whatever they want.
But, if you want to take it a step further, and help you achieve financial success, you need to create your savings goal first and secondly prioritizing those goals.
How to Prioritize Your Savings Goals?
Differentiate Between your Needs and Wants
There is a thin line between what you want and what you need. This picture can be a little blurry. But, to set your financial goals, you need to clear it up. You can argue that almost anything beyond your basic needs is your wants.
To save for the big things or bigger goals it is always suggested to cut out on your wants entirely or to an extent which is possible for you.
But one more thing important here is to set small and realistic goals initially. For example- you cut down on your luxuries, such as instead of buying an expensive phone just for show off you can go with a medium priced phone when is pocket-friendly to you.
Rank your Goals in Order of Importance
Once you have clearly defined goals, the next step you need to do is to rank your goals in order of importance. Take baby steps because taking bigger steps will need lots of time and money as well.
Start it with-
- Pay off your high-interest debt
- Having some emergency fund
- Save for your Wedding
- Start contribution for your retirement
- Save for your home down payment
- Children’s Education
- Have some investment for your future
Pay down High-interest-rate Debt Should be your Priority
It will not be a strange thing to know that most of us are in some kind of debt. Whether it be your ongoing education loan, credit card debt or a personal loan, home loan or a car loan. To achieve your financial goals the second step towards it can be paying your high-interest rate debt at first. These debts end up eating lots of money which go mostly on the interest. If we pay such debts early then we can save a lot of money, which can be used to save and achieve our next financial goals.
Try to Follow (50/30/20 rule) Money Formula
The 50/30/20 rule says – spend only 50 percent of your net income on your needs, then 30 percent on your wants, and then 20 percent on savings for your future goals.
It is difficult to strictly follow this rule, but it to achieve the goals it is important to follow this. We don’t live in a balanced world but with our efforts, we can try to be near around it. It might not be possible if you live in a coastal city, you might spend 50 % of your income. In this situation, it might seem impossible to save for big goals, so try with smaller goals.
Choose Your Saving Strategy Wisely
Saving money to achieve multiple goals needs a strategy. One can either try to save only for one at a time or save for all your goals at a time. It depends on you what you want to do and how?
Initially, start with saving for one at a time
When you start saving only for one thing at a time, the advantage with it is you can reach your goals faster. But the disadvantage is, you might be able to save for your other goals for long.
For example, if your first goal is to pay off your student loans, you might save enough to repay that first but on the same hand, you might not be able to take a vacation which was in your bucket list.
But after achieving your primary goals you should start saving for multiple goals side by side. This will help you to achieve all your goals in the future as easily as you are saving for it monthly.
Know Where to put Your Money
Keeping your entire saved money in our locker or account is never going to earn you money from that. So, why not go with those plans which yield you money from your saved money. For that one can opt for-
An automatic savings account or investment accounts allow you to save money without having any hassle and on top of it they offer interest on your saved amount.
Saving money in a recurring deposit is one of the most common suggestions. This is good when you are contributing on a monthly or quarterly basis towards your goal. In a recurring deposit account, you need to deposit a fixed amount of money every month for a fixed period. And against this, you are given interest which is approx. 7 to 8% as of now. This can be opened with any bank or Post Office for better and secure returns.
Investing in Mutual Funds
Investment in mutual funds is also a good option. This provides you maximum returns in the future. But, you have to decide its lock-in period and tenure wisely. You can opt for one which gives you more returns in the period which is favourable for you. When opting for a maximum time it gives you more returns.
Don’t forget to save for Your Retirement
Retirement is that period when you’re earning becomes exactly half or you can say there is no source of earning. In this case, you can only depend on your savings. So, it is a must to save adequate while you are earning only. This can be done by increasing your contribution in PF, By having a PPF account and saving in that regularly, Having life insurance policy or term insurance policy.
- Set buckets for each of your financial goals.
- Plan well and analyse how much you need to save for each goal.
- Opt for the correct financial tool or investment plan which gives you more returns.