Whether you just received your first salary or there is a new inclusion to your happy family – everywhere you turn, people are ready with their advice to plan for the long term. Long-term financial planning is a mantra deep-rooted in our society and passed on from generations. It is no doubt a necessity as it helps you secure your future by providing you better returns in the long run. But the question we’re asking today is, are you jeopardizing your short term finances by only planning for the long term?
Is it a good practice to only focus on the long term?
Nobody is questioning the wisdom of long-term financial planning. Rather we encourage you to ask a few simple questions to make sure you are not being farsighted and missing out on your short and mid-term needs. Questions like:
- Will your long-term planning help you in financial emergencies when you least expected it?
- Whether your long-term planning can help you buy an iPhone X in the next 6 months?
- Will your long-term planning help you finance your vehicle in the next 4 months?
- Does your long-term planning bring that precious smile on your partner’s face when you gift her jewellery on your anniversary?
The mistake many people make is putting all their money in one basket – the future. Ignoring your short-term financial needs is a mistake almost as grave as not planning for the future. Because then you’re putting unnecessary pressure on your present conditions. What would you do next? Keep your cravings aside and hope for an increment? What if it’s an emergency and you desperately need money? You’ll have to break in to your well-planned investments – foregoing any benefits you had envisioned and getting lesser than you had bargained for.
The pitfall of loans
It’s a situation we have all faced in some way or the other. You have put all your savings to earn higher interests via stocks and other financial assets, ‘locking-in’ that money for a fixed period of time. Suddenly, when you need that money, you are denied access to those savings. And that is when we make the worst financial move – having planned well for the long term, you end up taking consumer/personal loans to achieve short-term goals.
This is unfortunately a story more common than you’d believe. With loans you burden yourself to pay monthly EMIs at a higher rate which again affect your purchasing behaviors, further jeopardizing your short-term finances. Within no time you are stuck in financial doldrums and you become too confused to decide how to tackle these critical circumstances.
The solution is to preempt such circumstances in the very beginning and deploy your monthly savings smartly. What you save monthly can be generously invested in different financial assets, covering both the long-term and short-term goals. Your ideal financial tool for the short term should give you good returns if you save but the flexibility to draw on your savings in an emergency. This would safeguard your financial interests without affecting your long-term finances.
Group savings to the rescue
The best answer to better financial planning for the short-term is to participate in savings and borrowing groups. You can start saving in monthly installments and earn dividends every month till the group lasts. If and when you need the money, you have the option to borrow not just what you’ve saved, but the entire pot that the group collects. Without exploiting your long-term savings or burdening yourself with loans, you will be able to meet life’s demands. This would help you structure your short-term finances and achieve your goals easily as you continue to build your long term finances steadily.
KyePot is a simple and easy Android app that allows you to participate in saving and borrowing groups at your convenience. You can easily save in different groups and even tag each group with a goal you would like to achieve. And the best part – you earn monthly dividends alongside your payments, instead of paying higher interest rates for loans.
Don’t just invest in the future precious moments of your life. We can help you make even your present precious.