Why is it important to have long-term financial goals?

0















Written by Prashant Sawant, Co-Founder, Catalyst Wealth





Everyone wants to have a safe and happy future. We all want to achieve our goals in life. It is not easy; it takes a lot of work and time to get there. Similarly, financial goals that we set for a longer period of time are called long-term financial goals. Long-term goals are an important commitment. Investing and locking in a certain amount of money in stocks, mutual funds, and securities for years is called long-term investing. The feedback you get will be satisfying. By setting these types of goals, you will become better decision makers; it will motivate you on a daily basis and give you a purpose at work. Some of the long-term financial goals could be investing in retirement funds, saving for a child’s future, starting a business, buying a house, etc.


It is important to have a diversified portfolio, which involves investing in stocks, bonds, mutual funds and equity funds, gold, PPFs, ETHs and real estate .


How to budget and save for the financial goal?


You need to know and understand your income. Depending on how much money you spend and save on your income, you will decide how much you can invest in your financial goals. Setting the goal and choosing the starting point for saving will help you reach your goals much sooner. Using a 50/30/20 budgeting system is the best way to save money and move towards your financial goals.


Benefits of long-term financial goals:


Relatively low risk


Long-term investments are relatively less risky than short-term investments of losing your money. With long-term investments, the price of stocks and bonds increases and also gives you time to balance out losses, if any.


Less stressful


When you invest for the long term, you don’t have to keep an eye on the market all the time. Once you have invested, you just have to go through it on a yearly basis.


The power of composition


A system in which, after a certain period of time, your investment increases thanks to the interest earned on the principal amount and the accrued amount, is called compounding. Investments multiply through this process if invested correctly.


Save taxes


Long-term goals help you save a lot more taxes than short-term financial goals.


In the short term you have to pay 20-30% tax on earned capital, while in the longer term you have to pay around 5-15% on capital gains.





























Share.

Comments are closed.