Everyone wants to earn money and lead comfortable lives. But in the hectic schedule of work, deadlines and family responsibilities, most people tend to focus on their short-term goals (because they come first). As a result, critical long-term goals like retirement planning get postponed until it is too late.

And at such a late stage, you can be prone to making a few – mistakes in your quest to reach those goals. Instead, it is better to adopt excellent financial plan right from the beginning so that your investment journey is a smooth ride.

1.Have measurable goals

The first step is to create a list of goals you wish to achieve. ‘I want to create wealth for my retirement’ is a wish, not a goal. A financial goal is specific in the details. Here is a better way to put forward the same message.

I want to create a corpus of Rs. 5 crores for my retirement in 30years’ time. This is a measurable goal that tells you the purpose, the amount you want to earn and also the time.

Identify other long-term goals you wish to achieve and list them down including the details. Once you have these details, you can now proceed to identify the best investment option to help you achieve this goal.

2.Create a long-term financial plan

Long-term financial goals can happen anytime in the distant future. For example, you may want to buy a house in 10 years or finance your child’s college education in another 15 years. Since these goals are long-term in nature, consider an important factor – inflation.

The cost of products tends to go up over time. A four-year college education that costs Rs. 10 lakh today could cost you Rs. 20 lakh or more in another 15 years. This is why you need to create a long-term financial plan to identify how much you need to save each month.

And this plan should incorporate the effect of inflation. Otherwise, you may end up with a smaller amount when the time comes to fulfill the goal.

3.Invest to achieve these goals

There are many different investment options available in the market. However, not all of them are suitable to help you meet your long-term financial goals. For a purpose like a child’s education, you can consider investing in equity-oriented mutual funds through Systematic Investment Plans (SIPs).

These funds tend to offer much higher returns in the long-term compared to debt funds or hybrid funds. The risk level may be a bit higher too. But when you invest for the long term, the overall risk gets mitigated.

And when the date of expenditure comes close, you can reduce your risk by transferring your investment to liquid funds through a Systematic Transfer Plan (STP).

Similarly, you can invest in equity funds for a retirement goal that is far away. The good news is, when you invest through SIPs, you don’t have to worry about trying to beat the market for higher returns. When you invest in equities for the long term, the compounding effect comes into play, and you can earn substantial profits.

In the above example where you want to earn a corpus of Rs. 5 crores in 30 years, you need to invest just Rs. 7,000 per month in a fund that offers an annual return of 15%.But if you delayed this investment by a period of 10 years, your final corpus would be only Rs. 1.1 crore. So when you have a long-term financial goal, start investing in equities from an early stage for best returns.

Conclusion

Investing regularly in equities is vital to achieve your long-term goals. But the process does not end there. You also need to review the performance of your funds from time to time. This ensures that your investments are on track. In case you find that a particular fund is not offering the returns as expected, you can shift your money to a better alternative. This way, you can successfully meet your long-term financial goals right on time.