The Importance of Financial Goals and How to Set Them

Money is essential for managing daily living expenses, major life expenditures, and unexpected emergencies. According to Nepal Rastra Bank, a financial goal is the target set for savings and investments, determined by considering current and future income, expenses, and financial conditions to effectively manage everything from daily livelihoods to unforeseen crises. Financial goals can be classified into three types: short-term, medium-term, and long-term.

Nepal Rastra Bank explains that short-term goals are achieved within a year, such as planning to buy a bicycle worth Rs. 5,000 in one year. Medium-term goals are accomplished within one to five years, like aiming to purchase a plot of land costing Rs. 10 lakh in three years. Long-term goals are set for beyond five years, for example, saving for a daughter’s medical education over 10 years.

Benefits of Setting Financial Goals
According to Nepal Rastra Bank, establishing financial goals provides a projected picture of income and expenses, encouraging savings and curbing unnecessary spending. It motivates individuals to increase income sources and fosters diligence. Progressing with a plan can enhance business growth and improve financial stability. Additionally, financial goals help in facing adversities, reducing future economic uncertainties, and teaching self-reliance.

How to Set Financial Goals?
Nepal Rastra Bank suggests the following process for setting financial goals:

1. Identify future needs and prioritize them,

2. Create an annual, monthly, or income-based family budget according to estimated expenses,

3. Develop a savings plan to achieve the goals,

4. Remain committed to the plan,

5. Review and adjust the plan as needed.

Officials from Nepal Rastra Bank state that financial goals help individuals become financially disciplined and self-reliant.

Source: Nepal Rastra Bank