Introduction to Finance

The goals of Financial Planning

What are the financial goals?

A financial goal is a scientifically defined financial milestone that you plan to achieve each day.

Financial goals comprise of earning, saving, investing and spending in proportion that
match your short term, medium term and long term plans. Goals are very important in life.
They give you the energy and motivation to do extraordinary things. A financial goal can change
your perspectives about life and money. You will start evaluating your everyday decisions in
greater details. For example, you may not find anything unusual spending SSP 100 on the
cheapest regular coffee in the neighborhood coffee shop. If you are habituated to having such
coffee four times a week, you end up spending SSP 400 each week. on the face of it, this amount
may look small but if you multiply it by four weeks in a month and twelve’s Months in a year,
you see the importance of Financial planning.

Every financial goal will have the following

1. What is the purpose of spending?

You must have objectives of spending, whether on consumption or investment must be
clearly indicated in your plan to achieve. A good manager should lay out his various
plans and why he/she needs to spend
2. How much money is need

Many managers do not have effective and efficient budget to implement the project they have in
their plan and this can easily lead to failure of the project. You must know how much you need
for the project activities to avoid short coming in the process of project implementation.

3. How much times ( usually in years)of months or

Time is a resources and it should also be put into consideration when doing planning. How much
time you need in term of months or years is crucial. The activities deadline affects the whole
process and the outcome of the project or investment

4. Retirement funds

Retirement plan for every employee must appear in the master plan of the company and that
every employee needs something to invest after active work. In the company.

5. Home Purchase
 Home purchase is a requirement when doing budget. Whatever you want to buy must
clearly put into planning and how to achieve such plan.
6. Car ownership

To own a car need a plan for replacement when its become old or outdated. The services and
spare part must be in a car ownership plan. Insurance cover against accident, theft, fire etc must
be put in a plan too.

7. Debt clearance
Clear your debt to remain clear and free from the burden of the debts. Debt payment is an
achievement.

Types of Financial goals

Short term goals are some things you want to achieve in the foreseeable future over the next
few months. These are required for more immediate expenses. These expenses are generally
smaller in scope and easier to project and predict.

Medium term goals these goals lie between the short term and the long term. Short term goals
are planned for a year where as long term goals are planned for a decade. Medium term goals are
critical for evaluating progress against long term goals.

Long term goals These goals require more deliberation and in most cases, money, retirement,
buying a house and funding a child higher education are typically long term goals.

Examples of Financial goals

Life is full of financial goals. It becomes easier if you know all your goals and works towards
them. Financial goals are better in these aspects as you can simply put your money to work and
achieve them.

Here are some of the common financial goals

1. Emergency funds Emergency don’t come with notice but can just occur abruptly for
example, damage to your house or equipment, illness, accident etc can strikes anytime’s
and need cash in hand. Immediately, keeping all money in liquid assets will not help but
setting aside some money in saving account that can be withdrawn quickly can be useful
in building your emergency kitty.
2. Retirement Funds; retirement planning should start as soon as one start earning. If you
have a longer run way, you can serve smaller amount each month yet reach your
retirement kitty. When you have a particular amount, calculate rationally using projected
expenses, income etc, as a goal, you will get into the groove of saving for it in a
discipline and sustainable manner.

Benefits of early retirement planning

  Help you prepare for unforeseen medical expenses
 You can continue supporting your dependence
 Get better return on your saving
 Safeguard your assets and allows you to have a secured future
 Achieve financial independence
3. Buying a house; if you expire to own a house, you must have a clear vision of a
projected cost.
A clear milestone can help you work backward. For example, if you want buy a house
when you turn 35 yrs old, estimates the cost and start saving for it now even if you plan
to a vials home loan, you have to make some down payment and bear incidental
expenses.
4. A child higher education: Quality education comes with a cost and the cost is increasing
by day due to inflation and rising demand. Having a goal to reach a specific amount by
time your child turn 15 or 18 will help you build discipline in your savings.
5. Vacation: No, you don’t have to sacrifice your breaks and vacations. Old ag f you feel
energized, rejuvenated and refresh after break, go for it even the support this “All work
and no play make Jack a dull boy.”
What is important is to plan this well in advance instead of making it an impulsive
decision
6. Upgrade/Buy a new car: upgrade or replacing your car will be a lot easier if you plan it
a head, this is relatively easy because you know when you purchase your car.
If you are currently riding a bike but plan to buy a car when you get married or have a
child, say in three years from now, then plan accordingly.
Buying things on loan is quicker but very expensive. The bigger and longer the loan, the
higher the cost of that loan.