Setting savings goals is an important part of financial planning. It allows you to take control of your financial future, achieve your dreams, and build a solid financial foundation. By having a structured savings plan, you can overcome financial challenges, achieve financial independence, and meet unexpected financial circumstances with peace of mind. Discussed here is a stepwise guide on how you can set a savings goal for a sound financial future. Also, highlighted are the benefits of a savings account and its role in setting an effective savings goal.

Assess your financial status

Before starting your savings journey, it is crucial to have a thorough understanding of your existing financial standing. Begin by computing your month-on-month income and listing all your expenditures. Factor in both your fixed expenditures such as utilities, loan payments and rent and variable expenditures such as dining out and entertainment. This assessment will help you decide how much funds you can allocate realistically towards savings every month. Moreover, review your prevailing debts such as loans and credit card dues. Prioritise paying off your high-interest debts as they considerably impact your potential to save. A comprehensive understanding of your financial standing can allow you to form an effective savings plan.

Define your goals

The next crucial measure is to define your goals. Categorise your goals into long-term, short-term and mid-term. Long-term financial goals revolve around accumulating corpus for your retirement, child’s marriage, or home purchase. Mid-term financial goals might include saving for a four-wheeler’s downpayment, financing your child’s education, etc. Short-term goals include forming a contingency fund, planning for a vacation or buying a costly gadget.

For every financial goal, you must ensure to assign a particular monetary value. Ensure to consider inflation and anticipated future expenditures linked to such goals. Deciding an accurate figure can allow you to remain focused on attaining each goal.

Prioritise goals

Not all goals are created equal. Some are more important than others. Prioritize your goals so you can focus on the most important ones depending on their significance and urgency. A few goals such as forming an exigency fund must take precedence over other goals as they offer financial protection during unannounced financial shortages or fund mismatches. In contrast, long-term financial goals such as retirement planning need constant savings over a long time period to accumulate adequate corpus, towards which you must simultaneously contribute, besides short-term goals. Prioritising your goals can help you allocate your savings effectively. Concentrate on attaining high-priority goals while still contributing a small savings portion to other goals.

Open savings account

To ensure your goal savings stay separate from your daily spending, open a dedicated account offering a high savings bank interest rate to help you grow your corpus quickly over time. To avoid the hassle of local branch visits for opening an account, it is recommended to open savings bank account online. However, note that you must ensure to choose a bank account that matches your requirements and offers a competitive rate of interest, auto sweep facility and other financial benefits to grow your wealth.

Automate your savings

To make constant savings a habit, ensure to set up an automatic transfer mode from your primary bank account to your newly opened savings bank account. Automating your savings endows consistency and removes the risk of forgetting to put aside funds for your financial goals.

Ending note

Opening a savings account and setting up automatic deductions on such accounts facilitate disciplined saving habit and helps you reach your financial goals by the estimated time frame. These goals may include the need to form an adequate emergency fund, meet your aspirations such as purchasing a home, financing higher education, beginning a business, and preparing a robust retirement strategy. Moreover, by saving periodically and avoiding unnecessary expenditures, you can lower your debts and promote financial stability over the long term.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.