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How To Create A Budget For Short Term and Long Term Financial Goals?

Published On Aug 05, 2021 11:30 AM By InsuranceDekho

If you want to keep your finances under control, budgeting can prove to be a boon. Budgeting your finances allows you to keep track of your money and spend it where it adds the most value to your life, i.e., your short term financial goals. Planning your budget will also help in organizing and realizing your long term financial goals. However, before we start with the concepts of budget planning, let's learn a little about short term and long term financial goals. 

What are Short Term Financial Goals?

Your more immediate expenses are known as short-term goals. Although time frames vary, these include all the items you will most likely spend money on in the coming months or years. For instance, these goals might consist of travel, emergency fund, wedding, personal goods, rent, loan repayment instalments, minor repairs, home renovation etc.

What are Long Term Financial Goals?

Long-term financial goals are typically your big-picture expenses. These objectives may take several years, if not decades, to achieve. Long-term goals usually require more money and consistent attention than short-term ones. These might include retirement plans, a child's higher education, marriage, starting a business etc. 

How To Create A Budget For Short Term and Long Term Financial Goals?

Here are some tips on how you can create a budget for your short term and long term financial goals. 

  • Prioritize Your Goals

You will have to strike a balance between short- and long-term aspirations. Hence, it is advisable to work your goals around your regular expenses, prioritizing basic necessities such as food and housing. Moreover, since premium instalments of your term insurance or health insurance plan along with emergency and retirement funds are a priority as well, you can contribute to these first and then pay down your debt. The rest of your money can then be allocated to your wants and other savings goals. To prioritize your goals, you will need to use at least two parameters - duration of the goal and importance of the goal. Let's take an example to understand better. Suppose you want to start a business and save for your child's higher education. However, the goal for providing for your child's higher education is 10-15 years away, while you can start your business in 4-5 years. Hence, the two factors mentioned above can help you prioritize your goals. Other things to keep in mind when budgeting for your goals are that while the long-term goals may not change for a long time, short-term goals may change with time. Hence, it is wise to prioritize long-term goals in your budget as many short-term goals can be delayed.

  • Save Your Money

Before you start budgeting and saving for your goals, you need to know where you stand. Based on your salary, figure out how much you can spend and save each month. You might succeed in saving money by not buying things you don't need and putting the money toward your goals. You can use part of this extra money right away to achieve your short-term goals or save for your long-term objectives.

Take Away

The money-saving and budgeting strategies mentioned above can assist you in achieving success and protecting your family from unforeseen financial risks. Moreover, it will be wise to have a financial plan to protect yourself from unexpected events and keep things running smoothly if something goes wrong. 

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.        

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