We keep hearing about financial goals, financial objectives and such jargon. But not many are aware of their own financial goals. Many even save just for the sake of saving money, with total disregard for what may be essential for them. Financial goals need no introduction, but a guide to achieving them might. To understand these goals you need self-introspection. Let us check out a few steps to understand how to make financial goals:
Ask yourself is money important to you, if Yes then why?: The answer to this is the secret to your financial goals. Each one of us is striving to either serve our dependents or become debt free or simply save for retirement. Whatever the reason, it gives you the first lead in laying your financial goals.
Segregate and categorise these answers: You may not receive the answer at the very first instance, but once you receive the first one, it may open floodgates to many possibilities. List down all the possibilities and categorize them in terms of the period within which they are expected to be achieved.
Re-align your investment towards these goals: When you copy others or inadvertently follow someone, chances are high that your objectives and investment are moving in opposite directions. Now that you know your goals, it would be wise to recheck your investment and re-align them according to your goals.
Financial goals could be made with the above method. However, each goal must be in sync with a verified system to qualify as a valid financial goal. Following is the litmus test for every financial goal to be considered valid and genuine.
Precise: Goals like I want to be rich or I want the best car in town are not only vague but also futile. Goals must have an end because unless they are defined properly, we might be shooting in the dark. Every journey has a destination to it, likewise, every goal must be precise to achieve it.
Quantifiable: If retirement planning is your goal, then how much money shall be required for the same is its quantification. Goals that cannot be measured are mere dreams and following them cannot be treated wisely. If you do not know how much money is needed to achieve your goal, you will never know how much savings will be needed to achieve them.
Realistic and achievable: Needless to say, financial goals that are out of reach, should be given zero importance. There may be a thin line between dreams and financial goals, and to turn dreams into financial goals, they must be backed by numbers. It is okay to dream, but after giving due regard to your financial condition, it is only wise to choose those dreams that have at least a 50% chance of achievement.
Appropriate: I want to marry the most beautiful woman in my office might be an irrelevant dream. However, I want to get married abroad could be a financial goal. First and foremost each financial goal must possess a task which involves money in it and at the same time must also be legally and physically possible. Tasks that are an outcome of emotional uproar are generally invalid and must be carefully evaluated.
Time-bound: A timeless financial goal is not a financial goal, as something which does not have a time limit to it cannot be treated valid. Every dream has a time limit to achieve it, for example, ideally, your child’s education cannot wait beyond his or her educational age it must be achieved within a certain amount of time.
Every individual has his/her own set of liabilities. Hence it is pertinent to understand oneself well and once you know the destination, designing the itinerary is not that difficult. So, know your dreams and then follow your dreams because borrowed dreams are not real dreams.
(Viral Bhatt is the Founder of Money Mantra — a personal finance solutions firm)