22.3.1 Setting long-term goals Long-term personal financial goals are something that you will want to accomplish in the future. Long- termgoals require time and planning. They are not something you can do this week or even this year. Long-term goals are usually at least five years away. Sometimes it takes many steps to complete a long-term goal. For example, your long-term goal might be to graduate high school with a senior secondary certificate. This will take several years of going to school and studying. Going to class next month might be one step in achieving your goal. Passing an important test can be another step. Achieving these steps helps you reach your long-term goal. As a young person, you may not think too far into the future, but once you start to earn money and have a regular income, your short-term financial goals will turn into bigger long-term financial goals. These include putting down a deposit on a house, paying off a mortgage, starting a business, saving for a child’s higher education fees, and planning for your retirement fund. 22.3.2 Common long-term personal financial goals Buying a house For many, buying a house is a significant financial goal and likely the biggest purchase of their lives. It’s also a long-term investment, as property values generally rise over time. In Australia’s major cities, houses bought for under $100 000 twenty-five years ago can now exceed a million dollars in value. Owning a home offers security, vital for families and those nearing retirement. Buying a home typically requires a mortgage loan, with the house as collateral. This means that if payments are missed, the lender can seize the property. Loans usually span over 20 years or more with monthly repayments. Given the interest, the total repayment can be three to four times the borrowed amount. Over time, rising wages often make these repayments easier. Many choose to pay more than the minimum to reduce interest and repay the loan faster. Effective financial planning should account for these loan commitments.
SkillBuilder discussion Investigating 1. What event is shown in FIGURE2 and how does it relate to the long-term financial goals discussed in the text? 2. Why is the concept of property investment as a long-term financial goal seen as a good idea? 3. Discuss the challenges
FIGURE2 The purchase of a house can be a great investment for the future.
associated with buying a house or managing a mortgage.
TOPIC22 Financial goals and decision-making 633
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