Most of us wish to attain financial freedom at some stage in life. However, just thinking about it will not be enough. You have to start working on creating a savings plan tailored to help you balance your future and immediate objectives. Of course, discovering a suitable savings plan will necessitate a better understanding of these goals and how to sync with the. Here is a guide that may help in this regard.
1. Lay Down Financial Objectives
You should always know what you are saving up for. Goals may be segmented into two distinct categories, namely:
- Short-term objectives, which are between 1 and 3 years. These should include aspects like holidays, emergency funds, gadget purchases, etc.
- Long-term objectives are those between 3 and 10 years, including the education of your children, home purchases, saving for retirement, and so on.
Knowing which objectives are focus areas is always essential in this regard.
2. Make a Budget that is Realistic
Budgeting is a vital part of any savings plan. You should meet the 50:30:20 principles first. 50% should be used for groceries, rent, utilities, and more, while you should use 30% for your wants and leisure needs. Another 20% should be used for savings or investments, which are crucial and non-negotiable. Fixing limits on monthly budgets and spending is vital for making sure that your savings plan stays on track.
3. Make Your Emergency Fund
You should not jump headlong into long-term investments minus any emergency fund that spans at least 3-6 months of your living costs. It should be an emergency fund covering all possible losses, right from those linked to job and health issues and more. You should keep your money invested in a product/plan which keeps earning interest and can be liquidated whenever required.
4. Investment Diversification Matters
Once you get a clear picture of your savings objectives, you should choose investments based on your specific objectives. Diversifying is crucial for mitigating the risks of monetary losses on one investment. Here are a few investments that may sync with savings plans:
- RDs and FDs offer fixed returns, which are ideal for meeting short-term objectives.
- SIPs and mutual funds enable long-term wealth creation. You can invest smaller amounts every month, making it convenient to remain committed and benefit from rupee cost averaging.
- Direct stock investments can also give you higher returns, although these may come at higher risks in case you are not experienced.
- PPF is another option that is ideal for tax benefits and long-term savings at an attractive rate of interest.
5. Review and Adjust
Your plan for savings and investments should keep changing with every life stage. Periodic reviews and adjustments of the investment portfolio and budget may happen once every year or at the time of a new milestone in life. It will make sure that the plan continues syncing with evolving financial and life goals.
Conclusion
Building a savings plan that syncs with your objectives is not only about keeping money aside. It has a lot to do with strategic financial planning, which evolves along with your life circumstances and stages. Right from getting home and paying for higher education or retirement, the proper mix of investments, savings, and revising the plan will put you on the right track towards obtaining financial freedom.
