How to set Personal Financial Goals?

Sustainable development goals

Answer to “How to set sustainable development goals (SDG)”, will assist you in achieving your financial objectives. Personal financial planning is the process of deciding how much money to spend, save, and invest in in order to live comfortably, have financial security, and achieve goals. It is your responsibility to create and stick to a financial plan. The financial planning process consists of six steps that will assist you in reaching your objectives.

1.     Calculate Your Current Financial Situation for SDG

Make a list of items related to your finances to determine your current financial situation:

Firstly, you need to have some Savings, secondly, evaluate your sources of monthly income (job earnings, allowances, gifts, and bank account interest), thirdly carefully determine your monthly expenses (money you spend), and lastly must know your financial obligations (money you owe to others)

Keeping a careful record of everything you buy for one month is a good way to estimate your expenses. You can keep track of your expenses in a small notebook. You will be able to begin planning once you have determined your financial situation.

2.     Create a list of sustainable development goals

Consider your attitude toward money and ask yourself the following questions to help you develop clear financial goals: Is it more important to spend money now or to save money for the future? Do your personal values have an impact on your financial decisions? Values are beliefs and principles that you hold to be important, correct, and desirable.

Knowing the difference between your needs and your wants is another important aspect of developing financial goals. A requirement is something that you must have in order to survive, such as food, shelter, and clothing. A desire is something you want or would like to have or do. For example, if you live in a cold climate, you will need a coat in the winter. So, while you may prefer a leather jacket, other less expensive coats will also keep you warm. You are the only one who can decide what specific goals to pursue. You may want to save money, say for example Rs 10,000 per month, or 15% of each salary or wages cheque made out to you.

3.     Identify Your Options

It is impossible to make an informed decision unless you are aware of all of your options. In general, there are several options available to you.

Assume you are saving Rs 10,000 per month. You may have the following options:

    I.    Broaden the scope of the current situation. You may decide to increase your monthly savings to Rs 12,000.

  II.    Make a change in the current situation. Instead of putting your money in a savings account, you could invest it in stocks.

III.    Begin something new. You could pay off your debts with the Rs 10,000.

IV.    Maintain your current course of action. You have the option of not making any changes.

However, keep in mind that the costs of your decision may outweigh the benefits in each case.

4.     You will need to evaluate your options

As part of the financial planning process for sustainable development goals, you evaluate your alternatives in this step. Utilize the numerous financial information sources that are available. Examine your current life situation, financial situation, and personal values. Consider the implications and risks of every decision you make.

It is critical to stay current on social and economic issues because they can have an impact on your financial situation. A company that manufactures cutting-edge technology or designs the most fashionable clothing, for example, could be a good investment. Would you, on the other hand, invest in the company if you learned that it was being sued?

You cannot select all options, such as becoming a full-time college student and also want the income that comes with a full-time job. By pursuing your education, you forego the opportunity to work full-time, at least for the time being. The opportunity cost of attending college would be the benefit of working full-time.

However, deciding entails more than just knowing what you might give up. It also entails knowing what you stand to gain. For example, by attending college, you may be able to obtain a higher-paying job.

Type of risk

If you choose to ride your bicycle on a busy city street, you run the risk of being involved in an accident. You accept certain financial risks when you make a financial decision. Some examples of financial risks are, Inflation Risk, Interest Rate Risk, Income Risk (You may lose your job due to unexpected health problems, family problems, an accident, or changes in your field of work), Personal Risk (Driving for eight hours on hazardous roads) or the risk may not be worth the money you would save on airfare, Liquidity Risk (Liquidity is the ability to easily convert financial assets into cash without loss in value. Some long-term investments, such as a house, can be difficult to convert quickly).

5.     Create and Implement Your Financial Action Plan for SDG

A plan of action is a set of strategies for reaching your financial objectives. If you want to boost your savings, one strategy may be to reduce your expenditure. If you want to improve your income, you may take on a part-time job or work additional hours at your current employment. You might use the additional money to pay off bills, save money, buy stocks, or make other investments.

6.     Review and Revise Your Plan

Financial planning continues as you stick to your plan. Your financial situation and needs will change as you get older. That means your financial plan will have to change as well. Every year, you should reassess and revise it.

Different Types of SDG

Two things will impact your sustainable development goals (SDG). The first consideration is the time range in which you want to attain your objectives. The second component is the sort of financial necessity that motivates you to achieve your goals. The time it takes to attain a goal might be used to define it.

1.   Short-term goals must be completed in one year or less (for example, saving for a computer).

2.   Intermediate objectives (such as saving for a down payment on a house) require two to five years to complete.

3.   Long-term goals (such as retirement planning) require more than five years to achieve.

Goals for Different Needs

Consumable items are purchases that you make often and quickly deplete. This category includes food and goods such as shampoo and conditioner. Although the price of such products may not be the same as the price of a car, the costs of consumable goods pile up.

Durable products are pricey commodities that you do not buy on a regular basis. When utilized on a regular basis, most durable products, such as vehicles and big appliances, will last three years or more.

Intangible objects can't be touched, yet they're frequently crucial to your pleasure and well-being. Personal connections, health, education, and leisure time are examples of intangibles. Intangibles are sometimes neglected yet may be costly.

Personal Financial Goals

How do Economic Conditions have an impact on your SDG?

Financial goals at different stages of life

Life Situation

Financial Goals and Activities

Young single adult

· Obtain career training.

· Become financially independent.

· Obtain health insurance.

· Develop a savings plan.

· Carefully manage your use of credit.

Young couple with no children

· Create an effective financial record-keeping system.

· Obtain adequate health and life insurance.

· Implement a budget.

· Carefully manage your use of credit.

· Develop a savings and investment program.

Couple with young children

· Purchase a home.

· Obtain adequate health and life insurance.

· Start a college fund.

· Make a will and name a guardian for your children.

Single parent with young children

· Obtain adequate health, life, and disability insurance.

· Make a will and name a guardian for your children.

· Establish an emergency fund.

Middle-aged, single adult

· Contribute to a tax-deferred retirement plan.

· Evaluate and select appropriate investments.

· Accumulate an adequate emergency fund.

· Review will and estate plans.

Older couple with no children at home

· Plan retirement housing, living expenses, and activities.

· Obtain health insurance for retirement.

· Review will and estate plans.

Economic conditions, measurement, and their impact on financial planning

Economic Indicators  

What it indicates          

Impact on Financial planning

Consumer prices

The value of a dollar; changes in inflation

If consumer prices increase faster than wages, the value of the dollar decreases—a dollar buys less than it did before. Consumers tend to buy fewer goods and services. Lenders charge higher interest rates.

Consumer spending

Consumer Demand for goods and services

Increased consumer spending usually creates more jobs and higher wages. Reduced consumer spending causes unemployment to increase.

Interest rates

Cost of money, cost of credit when you borrow, and the return on your money or invest.

Higher interest rates make borrowing money more expensive and make saving more attractive. When interest rates increase, consumer prices tend to increase.

Money supply

The dollars available for spending in our economy

The Federal Reserve System (Fed) sometimes adjusts interest rates in order to increase or decrease the amount of money circulating in the economy. If the Fed lowers interest rates, the money supply increases. If the Fed raises interest rates, the money supply decreases.

Unemployment

The number of people without jobs who are willing and able to work

Low unemployment increases consumer spending. High unemployment reduces consumer spending

Gross domestic product (GDP)

Total dollar value of all the goods and services produced in a country  in one year

The GDP provides an indication of how well people are living in a country


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