Introduction
Financial goals refer to the aspirations in the life of an investor that needs to be achieved when the person invests his money. By setting financial goals, chances of regretting are minimized and it ensures that the desired goal of investment is realized. These goals vary from one investor to another and it is necessary for a person to prioritize the objectives and the time frame that will enable the achievement of these goals. This paper explains some of the trends involved in setting long-term financial goals.
Discussion
Setting up long-term financial goals is important as it controls daily operations and acts as a guide towards the achievement of the objectives of the business. It ensures control of spending, saving of money and investing in significant aspects of financial planning. Financial planning also assists in establishing financial success.
The main decisions that need to be made by financial managers, as well as individual investors in long-term financial planning, are usually the same. One of these decisions is to determine the goals by writing them down and being specific about them. This enables visualization of the goals and helps in understanding them. The second decision is classifying goals as either short-term, medium or long-term goals. It assists in knowing whether the business is on track or some changes need to be made.
Some of the economic variables include forecasts of future returns, risks and correlation between these variables. These variables can be obtained by financial analysis such as internal rate if return (IRR), rate of return on investment (ROE) or asset utilization ratios.
The major challenges faced by managers in making financial decisions include a shortage of talents such as young people that are upward, professional, and efficient in the field of investment and financial management. The other challenge is different cultural environments such as labor market, employment structures, and cultures that create difficulties for multinational institutions that are maybe willing to attract and maintain qualified staffs in financial management. Decision-making on the method of funding the business may be determined by the source of funding.
During investment planning, the manager also needs to understand the concept of portfolio diversification. This is the process where the manager does not put all the resources in one line of investment. It involves investing in various areas to increase the chances of making more money and prevention of losses as a result of investing in volatile industries.
Conclusion
The lessons have enabled me to understand the benefits that I would gain if I make long term financial goals and plan for them. It has also assisted me in knowing the decisions that I need to make when making financial goals.
The most difficult topic that this course has taught me is the challenges faced by managers in making financial decisions. I have been able to understand the topic and it would be better understood if more research was done on the challenges faced by financial managers and the results forwarded to them for mitigation.
The effects of the lessons learnt can be measured by implementing the guidelines for financial decision making and estimating the increase or decrease of performance of an organization from the previous performance.
Generally, the study has provided a sound achievement of the course objectives by elaborating the right guidelines fro making long term financial decisions that if implemented can result into changes in profitability of any business.