To feel more secure with your finances, it’s important to set some solid financial goals. A financial goal is a target you aim to reach while managing your money, and it usually revolves around saving, budgeting, or investing.
Financial goals can be categorized based on their timeframe into three types:
- Short-term (<1 year), such as paying credit card bills, creating an emergency fund, and buying new electronic devices.
- Medium-term (1 – 5 years), such as wedding costs, buying a car, or getting health insurance.
- Long-term (>5 years), such as children’s tuition fees, purchasing a house, or starting a retirement fund.
How can you achieve your financial goals? There are several strategies you can implement:
- Analyse your monthly income and expenses
- Identify which expenses you can set aside or prioritize (pay yourself first)
- Determine the goals of allocating your earned money
- Have a solid investment plan in place.
To help track expenses, set budgets, and monitor investment performance, make use of the various features available in the myBCA app.
Investing to Achieve Financial Goals
As previously mentioned, investing is a great way to work towards your financial goals. However, developing a solid investment plan is crucial for achieving those goals. If f you are interested in investing, the first step is to thoroughly research the investment instruments you are considering. Avoid following trends or making impulsive decisions, especially if you are new to investing or do not fully understand how a particular investment works.
Since investments take time to grow, it’s important to use “cold funds” – money that you won’t need for a while. This approach can help you avoid the temptation to withdraw your investment prematurely, which could negatively impact your results.
Lastly, figure out how long you want to invest. This will help you determine how much risk you’re okay with and what kind of returns you can expect. Generally, the longer you invest, the lower the risk, giving you more time to evaluate your options and make informed decisions.
Plan Your Finances Before You Start Investing
Are you interested in investing? Before you dive in, it’s a good idea to plan your finances first. Understanding your risk tolerance is key when it comes to investing; this is commonly known as your risk profile. Since everyone has a different level of risk tolerance, the myBCA app can help you figure out where you stand.
To effectively plan your finances, consider the following methods for allocating your funds:
- The 50/30/20 Rule. Allocate 50% of your income for daily needs, such as bills and living expenses; 30% for investments or retirement funds; and 20% for emergency funds and other financial goals.
- The 4-3-2-1 Rule. Allocate 40% for daily needs, 30% for bills or living expenses, 20% for investments or retirement funds, and 10% for social activities.
Both financial planning methods are influenced by various factors and can look different for everyone. In addition to following the established guidelines, it’s important to find the method that works best for your own situation.
Once you’ve got a solid financial plan in place, the next step is picking the right investment option that feels right to help you reach your goals.
Are you ready to start investing? Begin your journey with the myBCA app! Download myBCA by clicking the button below: