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Planning Your Long-term Financial Objectives

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Managing your finances prudently and watching your wealth grow is one of the most fulfilling things in life. Since the beginning of the year 2016, the price of gold keeps going up and those who invested in the precious metal years back are now smiling all the way to the banks. You need to be among those making such wise financial decisions early on and build their own sustainable financial empires.

We all want to live a happy life free from the burdens of debts and financial shocks when emergencies occur in our lives. However, to get to that point where all is smooth sailing is not by accident; you need to take deliberate steps in securing your financial freedom both now and in the future.

Need for budgeting

It all begins with your spending and saving habits which then determine how much you are able to invest, and eventually determine how wealthy you become over time. If you are interested in building long-lasting wealth you need to analyze how much you earn and how much you spend and create a personal budget that will guide your financial transactions going forward. The budget should always be for a given period of time; and should include all your foreseeable costs and certain sources of income within the period under consideration.

Having the long-term view

The long-term view of life is very important when doing your personal financial planning with an aim of being financially free at some point in time. Your long-term objectives in life will determine your financial needs which in the end will influence the channels you decide to use to generate the income to meet those expenditures. This is the reason why it is always advised that you need to start with the end in mind as you come back to date.

Say for instance you want to own a ranch where you shall retire peacefully to and be tending to your herds of cattle. You will first have to consider how many years from today you want to buy and set up operations running in the ranch. Then you will have to think of how much it will cost to buy and set up the ranch. This will then advice you on how much money you need to start saving every month and investing today in order to have enough money to buy the ranch in say 20 years down the line. Of course there are other financial calculations involved in this in order to discount the future cash flows to their present value; but in a nutshell, the planning must be done today!

Setting of milestones

Once you have the long-term objective in mind it is then very easy to break it down into smaller manageable milestones. These milestones can be in a couple of years, annual, semi-annually, quarterly and finally monthly. At the monthly level, that is where you plan on how much you are going to set aside as savings towards your goal. You then need to decide which investment vehicle will best suit your savings in order to accelerate your path towards meeting your investment goals in the long-run.

Based on your risk appetite, you may prefer investing in the financial markets using the different instruments available there or you may decide to save your money. For those who go with saving, the decision on the saving mode you choose will be determined by whether you want to earn interests and capital gains on your savings or you just want to store the value of your savings. If interested with interest incomes, fixed deposit savings accounts will come in handy. However is interested with both capital gain and shielding your wealth from depreciation as a result of currency fluctuations, you may want to consider saving your money in gold.

Choosing your investment strategy

For investment enthusiasts, there are a myriad of options out there that await you; ranging from the passive to the active investment options. Under the passive investment strategy, you will use your savings to accumulate different assets and form an asset portfolio that will be managed by a third party. Your daily presence is not required and your investment manager is responsible of making investment decisions that grow your wealth based on the terms of agreement you have with them. Investment vehicles available under this category include mutual funds and unit trusts as well as real estate investment trusts among many more. For the active investment strategy, you shall be personally involved in the day to day management of your portfolio. Investment vehicles in this category include running your own business, active participation in daily forex trading or stocks trading among others.

Whichever investment strategy and vehicle you choose, always ensure it is aligned with your long-term financial goals and it helps you in achieving your medium term milestones.

Last updated on April 16, 2016.

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