Question

Achieving the chosen long-term financial goals is not an easy task, you are required to discuss the factors which you will be considered in achieving your chosen long-term financial goals. Is there any role of financial institutions in achieving your chosen long-term financial goals? (1200 words)

Answer 1

Financial goals are very important and planning to achieve that is also very important.

Financial goals and proper planning is helpful to achieve short term and long term goals. Tax planning, prudent spending and careful budgeting will help you keep more of your hard earned cash. But achieving the goal is not an easy task.

There are some factors which can be considered for achieving the goals.

I) Make your goal smart- Make your goal specific, measurable, attainable, realistic and time specific

ii) Do some research and some calculations- For eg-: Your goal is to travel overseas. How much it will cost? Call a travel agent and do some research today. Once you will get some idea, you could plan accordingly.

iii)Use your budget-Building a budget gives a snapshot of your current financial situation, financial health and spending habits. It is impossible to know if and how will reach your goals without first knowing where you stand financially at present time.

iv) Earn more than you spend-You definately need to make some adjustments for achieving the goals.

Work on formula"Earn more and spend less". Use your budget and look at each of your expenses in turn and see if you can reduce your expenses.

v) Track your progress- Always track your spending behaviour and saving plan against your budget.

vi) Pay yourself first-First put aside funds for saving or investment than spend the rest.

vii) Automate vs Discipline- Commitments and discipline are always good but automation is better.

Eg-: automatic transfer in RD in internet banking.

viii) Create an emergency fund-Unexpected expenses always pop up and having an emergency fund means you have available funds to cover them.

ix) Educate yourself- Financial education is must for better planning and taking decision at right time.

The primary role of financial institutions is to provide liquidity to the economy and permit a higher level of economic activity .Like;

Banks accomplish this 3 main ways- offering credit, managing market and pooling risk among consumers.

Investment bank do not take deposits, instead they help individuals for investments in different financial products by offering different plans like mutual fund .

Insurance company helps individual in transfer

loss or risk associated with any business activity.

They also sell life insurance plan for any unexpected incidents.

Without financial institutions, people would not be able to take advantage of rising and falling Interest rate and there would be no saving of money.