How to articulate Financial Goals

Deciding how much you wish to earn over a particular period of time does not suggest materialism, pride, or greed. It encourages you to plan effectively other aspects of your life such as accomplishing social, family, intellectual and physical aims. Given below are some helpful tips to help individuals in articulating fiscal ambitions:

Implement the SMART principle:

The best way to begin articulating your goals is by following the SMART approach which is a vital part of setting goals. SMART stands for:

Specific: Objectives need to be specific, clear and not vague. For example, ‘I want to invest some money’ is ambiguous whereas ‘I want to invest in Axis mutual funds because of higher payout’ is precise.

Measurable: Any goal must be quantifiable in terms of ‘how much’. Taking the previous example, ‘I intend to invest in mutual funds’ gives a rough picture but ‘I want to invest 50,000 in mutual funds at the end of 6 months’ is measurable.

Achievable: As the word implies, aims need to be attainable. Don’t set goals which are unrealistic. Assess your current financial situation and then determine objectives.

Relevant: Are you investing in equity because your friend did the same although you know that it is not your preferred choice of investment? Then your goals are not in alignment with your aims in life. Ensure that the financial instrument you choose complements your personal desires.

Timely: Have a clear picture about the duration required to reach a particular target and always set a timeline.

Make a PLAN:

Planning is the key aspect when a person articulates fiscal targets and desires to achieve them. If you want to buy a new car for your father in a span of 6 months, you must plan your finances in such a manner that you save a certain amount of money every month and execute your goal. Moreover, don’t just create a plan, work towards it. Assess your plans on a monthly basis and check if you are sticking to the goal.

Get others involved:

You are too tempted to buy classy cuff links even though you don’t really need them. If your partner, friend or colleague is aware about your financial plans, they can discourage you from making such unwanted purchases and persuade you to save that money. Expressing your monetary goals to a trusted person will give you an extra push in reaching your goals.

Prioritize your financial objectives:

Once you have made a list of your monetary goals, the next step is to rank them in order of priority. For example, paying for your parent’s insurance is high-priority but buying the latest LED television is low-priority.

Successful financial plans are those which are achieved in the given time frame. If you don’t have lucidity about goals to be accomplished at different stages of your life, then it is less likely that you will achieve them. Plan your goals well and make sure they form a broader part of articulation in your life.

Mutual Fund vs Fixed Deposits - A Useful Comparison

Fixed deposits have been the preferred choice of investment for not just investors but also for individuals who want to put their funds in a safe place and get fixed returns. Having a pre-set rate of interest, fixed deposits are offered by several financial institutions. However, over the years mutual funds have gained popularity over fixed deposits owing to better returns. This has resulted in people thinking ‘Should I invest my money in secure bank deposits or mutual funds?’ We compare the key features of both products to help you make an informed decision.

Earnings on Investment:
Widely known as return on investment (ROI), profit is a crucial factor. Banks have a fixed ROI for certain income slabs and age groups. Interest can be calculated monthly or quarterly. In case of mutual funds, ROI is not fixed. It is largely controlled by market conditions.

Impact on Taxation:
After returns, this is another vital aspect that investors ask their financial advisors. Income gained from mutual funds and fixed deposits is taxed differently. Interest accrued from fixed deposits is charged in accordance with tax slabs of the individual and it is included while filing returns. Mutual funds generate dividend which are assessed as capital gains. If mutual fund units are redeemed in less than 3 years, they attract lower tax rates. If you don’t sell them for 3 years, tax charged is almost nil making your investment highly profitable.

Ease of Withdrawal/Liquidity:
If you have a fixed deposit of Rs. 2.5 lakh and need Rs. 30,000, you have no option but break your entire investment. Besides, there is a penalty charged in some cases and rate of interest falls too. Mutual funds offer the advantage of complete liquidity. Investors can take out any amount they want and it’ll be removed from the total value. Returns will be generated from the remaining amount.

Growth of Capital:
When it comes to capital appreciation, mutual funds score over traditional fixed deposits. There is a small amount of equity involved in these funds which leads to rise in capital. Moreover, escalation of interest rates and the brilliant professionalism displayed by fund managers these days, mutual funds offer superior capital appreciation as compared to fixed deposits.

Volatility Factor:
This is a no-brainer. In case of fixed deposits, the rate of return is predetermined hence the returns are also fixed making it a safe low-risk financial product. Mutual funds’ performance is based on market trends. Any kind of instability in the market can affect the mutual fund value and result in poor returns.

Fixed deposits have a pre-set rate of interest making it an ideal product for investors who want to play safe and believe in capital preservation. Mutual funds on the other hand attract lower taxation and offer easy liquidity. Ultimately, it depends on the investors financial goals. They have to closely determine whether it is mutual funds or fixed deposits which will best fulfil their future monetary needs.

4 Essential Reasons for having Life Insurance

When we start earning money, we invest our savings in mutual funds, fixed deposits, equities etc. However, many of us hesitate to buy an appropriate life insurance policy and keep postponing it. We need to realise that life insurance is the only tool which can help your immediate family in bad times and take care of their needs if something happens to you. We list the top 4 reasons why you need life insurance.


Fulfil your family’s monetary needs: 
If you are the sole breadwinner in the house, then it is crucial for you to be insured. If anything happens to you, there won’t be any source of income for your loved ones making it tough for them to fulfil even their basic requirements such as food and education. Taking life insurance will ensure your loved ones have adequate funds to survive.

Repay debts and clear other payments:
You have taken a home loan to buy your dream house or borrowed funds from a friend/colleague to begin your venture. In such cases, it becomes difficult for your partner or family to repay the money. Money obtained from your life insurance policy can help in clearing off these debts and take the burden off your family.

Tax deduction on premium: 
Life insurance not only offers financial protection but also acts as a useful tax saving tool. As per Section 80C of the Income Tax Act, premiums paid yearly for life insurance are entitled for tax benefits.

Enables you to Sleep Peacefully: 
Money can’t compensate the passing away of a loved one. However, once you have an effective life insurance policy in place, you are at peace because you know that if anything happens to you, your family can live comfortably without depending on anyone. 

Nobody lives for infinite years, death is certain. But no one knows when it will strike a person. Hence, it is always better to be prepared and plan in advance so that your loved ones don’t have to go through any financial turmoil. If you don’t have a life insurance policy yet, buy one right away. Premiums are low if you start young.