Financial goal calculator

What is financial goal planning?

Financial goals are the priorities and targets that you set for how you want to save and invest money for the future. Financial goals are unique to each person, because everyone has different priorities. Examples of financial goals include buying a house, buying a car, meeting education expenses for children, retirement planning and so on. Depending on how far away in the future these goals are, they can be classified as short-term, medium-term or long-term financial goals.

When you are saving for the future, an aspect that always needs to be considered is inflation. Inflation is the rise in prices which reduces the buying power of money over the years. So for instance, if you are planning for your retirement needs, the amount of money you would need in today’s terms would be significantly lower than what you would need in the future when you actually retire.This is because purchasing power of a given sum of money will reduce over time due to rise in prices or, inflation.

Making a road map to identify, estimate and meet these financial goals is financial goal planning.

What is the process of financial planning?

The process of financial planning would start with taking stock of your current financial situation, identifying & estimating your financial goals and then charting out a road map to achieve them. This could be done with the help of a professional or on your own with the right tools (for instance, a financial goal calculator) and inputs.

Benefits of using goal calculator

With a financial goal calculator, you will know what your goal amount will be after adjusting for inflation and how much you need to save and invest regularly to get there, with just a click of a few buttons. Here are some of the ways in which using a financial goal calculator will make your life easier.

• The financial goal calculator helps estimate what your goal amount should be, keeping in mind the rate of inflation and years you have before you need the money. It is far easier to know what the current value of any goal is – such as down payment for a home, buying a car, going on vacation etc. The financial goal calculator helps you take this easy-to-know amount and work out what you actually need.
• Breaking down a big sum into smaller monthly investments makes it more attainable and easier to manage. The financial goal calculator helps you know how much you need to invest each month to get to your financial destination.
• It helps to plan the finances better.
• The financial goal planning calculator gives you a complete picture on how much to save, how much money will be required to build the corpus, how much more to invest and acts as a guide on financial planning. 

How do financial goal calculators work?

A good financial goal calculator will help you know  what your goal amount should be. It takes into account the amount needed for a particular goal today, accounts for inflation to tell you what your goal amount should be. The financial goal calculator also tells you how much you will need to save each month in order to reach that goal amount. The financial goal calculator helps you to plan for and stay on track with the big picture by breaking it down into smaller steps without getting bogged down.

How to Use PrimeInvestor’s goal calculator?

PrimeInvestor’s financial goal calculator will help you plan for any financial goal you may have.The following are the inputs that are required.

• Financial goal in today’s value. This is the amount you need to fulfil a particular goal if you were to do it today. For example, if your goal is to buy a car, then you consider the price of the car today.
• Number of years to reach the goal.
• Expected inflation. This is the rate at which general prices of goods and services are expected to increase every year. You can either use inflation rates specific to your goal, or simply use an average of the overall headline inflation numbers. This will help calculate what your target goal amount should be.
• Expected returns from investments. This is the return you expect your investments to earn. While it can be tempting to use high returns or just the latest 1-year returns, know that you need to be realistic.

Once you key in the inputs, the financial goal calculator will provide the following information with which you can design your portfolio and begin working toward that goal. The output of PrimeInvestor’s financial goal calculator will be as below:

• The estimated future amount you need at the end of the period to meet the desired financial goal
• The monthly investment needed in order to achieve the goal.

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