How to Budget For Short Term Financial Goals

Most people educate you about planning for long-term goals, including your retirement, child’s education, marriage, etc. However, not many will tell you about the short-term goals and how you can budget them well.

You want to achieve numerous goals in a short time, but a lack of knowledge and proper budgeting results in failure to achieve the goal.

This article will help you know the right budgeting tips to plan and achieve short-term financial goals. But, before that, let’s take an insight into the short-term goals.

What are Short-Term Goals?

Goals that you want to achieve within six months to 3 years are known as short-term goals. The best example of short-term goals includes your marriage, buying a car/bike, planning a vacation trip with family, and more.

If you are one of those planning for short-term goals, the below-listed points will definitely help you.

Prepare an Emergency Fund: Creating an emergency fund is itself a short-term goal. An emergency fund is an additional and secure fund that can be used in case you lose the source of income for a few months. This situation occurs in case of job loss or unpredicted medical issues. But, preparing an emergency fund is also beneficial to settle your short-term goals if you fail to save adequate funds for your goals.

Diversifying your emergency fund into FD and liquid funds is always a good practice. You should prefer putting 40% of your fund into FD, which offers a decent return of 4-5 percent. Furthermore, you should put the leftover 60% amount in liquid funds that can provide you up to 10% returns.

Ensure Your Principal is Safe: People’s biggest mistake when saving for short-term goals is investing their money in highly volatile investment assets like stocks. Investing in stocks for the short term is more like a gamble which isn’t profitable for everyone. It’s a bad practice if you are unfamiliar with the stock market. Investors with detailed knowledge about stocks can earn from intraday trading, but it’s only feasible for some.

So, you must invest your saving in an instrument that secures your principal amount. The best place to invest for short-term goals is debt funds, bonds, and traditional FDs.

Keep Your Investment Amount Handy: In the short term, you will require funds that can be used to fulfill your goal. However, many investment assets involve restrictions. E.g., if you are investing for tax benefits, you may invest in ELSS, where the lock-in period is three years. It means your amount is locked for three years; hence, it is clearly a wrong choice for short-term goals.

You should invest your money in instruments that let you dilute your assets as soon as possible. You should choose the instruments that include no regulations in dilution.

Still, if you are stuck where you need instant cash and need more funds to meet your short-term goals, you can get the funds you need quickly. Many lenders are nowadays available to provide desired loans for a short tenure.

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