The Path to Financial Success: Step# 2

Set Up Your Financial Goals

Setting up you financial goals is like dreaming you dreams. It is like imagining your wants and describing them to yourself in terms of what, when and how much. To help you set up your financial goals, Here are a couple of questions you should answer.

1. What kind of lifestyle do you want? Are you contented with your lifestyle today or do you wish for some improvement?
2. How do you want your lifestyle to improve? By how much more do you need to save to have a better lifestyle?
3. How much financial comfort in terms of passive income do you want to have in the next five, ten or fifteen years? Should you prioritize insurance, investments or business?
4. How and by how much can you augment your current income? Think about sidelines and small businesses or investments.
5. How much can you afford to save every month? Do not think about an actual price but think about percentages.
6. Which of your current expenses can you live without? What things are optional and what are necessary?

Now you should be able to write down your goals. First, put all your answers into writing. This way you can internalize your goals and realize what you need or what you want to enjoy in the future. Second, State it positively. Do not say "I will save $200 per month because I will not go malling or go watch movies". Instead, state it as "I want to save $200 every month for a new car soon". And last, set up how soon you want to accomplish your goals. Things like soon, in a couple of months, or sometime in the future should do it. Monitor your progress and adjust depending on some unexpected occurances.

Here are some important financial targets you should aim for.

1. A cash reserve in case something unexpected happens such as an injury, disease or if you lose your job. It should be good enough to cover all your expenses for six months when unemployed.
   
2. Term life insurance
3. Medical Hospital Insurance
4. Long-Term savings plan for important things such as education, pension and housing.

The ideal savings per month should be 20% of your current income. Now I know this is a lot but your expenses should adjust to this and you should find out that you can certainly life without this amount. One way to do this is to NOT think about that 20% and treat the 80% as your full salary.

Now, one way to save efficiently is to give a certain percentage of your savings to each. If you haven't finished your cash reserve then make this your primary target. like give 10% of the 20% savings for cash reserves. Then distribute what is left to your other investment goals. I know this may be hard but trust me, those 4 invesments are really important.

For more, continue reading Compound Savings Interst!