. Even if you have a lot of money at any given point in time, lack of proper planning
could see it all go down the drain.
A financial goal is a target to aim for when managing your money. It can involve
saving, spending, earning or even investing
Goal-setting is the most fundamental step. Like when you go on a trip, there is
a destination; it is the same for any investment. You cannot and should not invest
without a goal. Investing without a goal is like getting into a taxi, and when asked,
“Where to go?”, you answer “I don’t know, take me somewhere”.
You can set goals in many ways:
- Sit and think about what you plan for the future: write them down
- Discuss with family members since they are important stakeholders for your journey
- Major life events like marriage (or not), children (if any), career changes, early
retirement etc. will require revision of these goals
Everyone’s situation is unique. No one has the same bills, rent, debts, or lifestyle.
When you’re ready to take control of your financial lifestyle, you need a plan that
will answer your specific problems, not your neighbor’s
Financial goals are the long-term, short-term and intermediate goals that form the
basis of a holistic financial plan. The best financial goals align with your values
and personal objectives.
Not to be confused with a budget or financial plan, financial goals are specific
and measurable milestones that, when reached, bring you closer to your ideal future..
For example, if you plan to buy a car in next 2-3 yeas, it can be called a short-term
goal. Likewise, if you wish to plan for your retirement and children’s higher education,
then these can be termed as long term goals.
Your goals can then be broken down to three broad categories:
- Essential Needs : living expenses such as food, clothing and shelter.
- Lifestyle : holidays, new cars, upgrading the home.
- Legacy : endowments, leaving something behind for grandchildren.
Your Financial Goals and Your Budget Go Hand-in-Hand
Creating a realistic budget and sticking to it is a worthy financial goal in itself.
Without a budget, you will flounder in your efforts to meet your goals.
Money management and financial planning rely on solid budgeting skills. Your financial
goals are a component of your overall financial plan, and your budget allows you
to review your plan and adjust as needed to reach your goals.
Just like professional athletes keep detailed records of their workouts and successes
to gain perspective and track their progress, you can use your budget to review
your financial achievements and setbacks and identify any areas of your plan that
may need to be adjusted.
Your budget will also give you a feeling of control over your financial situation
and the confidence to persevere in the face of financial adversity.
Goals are defined by the following characteristics:
- Specific
- Measurable
- Attainable
- Relevant
- Time-bound
Creating a list of financial goals is vital to creating a budget. When you have
a clear picture of what you’re aiming for, working towards your target is easy.
That means that your goals should be measurable, specific and time oriented.