Everybody has a financial goal. Even if you think you don’t have a financial goal, you do - it’s just not defined yet.
So, let us tell you what exactly financial goals are.
Martin Luther King had a dream.
I am sure you do too.
You probably want to buy a home in the next 10 years, or buy a car in the next 2 years, or have a great trip to paris soon enough. These dreams are dreams, unless you have a well-defined plan to achieve that. If you have a plan to make these dream come true, then they are called goals.
The life goals that you need money to achieve, are called financial goals. Simple as that.
A well defined financial goal, has 2 key parameters which need to be set to make that goal called, “a proper financial goal”.
- Goal Value:
For example, Rahul wants to buy a home - but he needs to define what type of home he wants to buy. Homes can range anywhere, from Rs.15 Lakh to Crores.
When you have a goal, you need to define how much it will cost.
- Time Horizon:
Rahul has decided that he wants to buy a home worth Rs.50 lakhs - now he needs to decide, after how much time he wants to buy that home?
When you have a goal, and you know how much it will cost, you need to define after how much time you want to fulfil that goals. How much time it takes to actually make it true is something we figure out as financial advisers.
I’ve explained what financial goals are, in detail here, www.7prosper.com/post/how-to-define-financial-goal.
There are many people in the world, who do not know how to make a realistic financial goal, and if you’re one of those people, you are about to learn how to determine financial goals.
Step 1: Take a pen, and write the things you want to do, i.e. your dreams (they’re not goals at this point, since you don’t have a plan, yet) that needs money for it to come true.
Please be realistic though. Don’t write you want to take a space tour by the time you’re 40. Write things that you can actually achieve in the near future, with your current financial status and income.
If you’re in your early 20s, your goals could be buying a bike, buying a car, going on a vacation with friends, study further, etc.
If you’re in your late 20s, your goals could be, having a great wedding, buying a house, supporting your parents, going on a vacation, etc..
If you’re in your 30s, your goals could be, to start saving for retirements, start a business, save for children’s education, etc..
Just write down all the things you want to do..
Step 2: Figure out how much money you’ll be needing, in order to make these dreams come true. Again, we need to be realistic in this step too.
We can’t aim for a 1 crore house, when the monthly income is Rs.25000.
Step 3: Once you’ve written your goals down, and written how much money you’ll be needing, It’s time to figure out in how much time, do you want this goal fulfilled.
I’ll make this process easier for you.
Create 3 categories: Short Term Goals (goals that could, and should be achieved in the next 5 years), Medium Term Goals , (goals that could be achieved in the next 5-10 years) and Long Term Goals (goals that could be achieved in the next 10-15 years).
Start sorting your goals into these 3 columns.
Put the goals that should be achieved in the next 5 years, in ‘Short Term Goals’ section.
Put the goals that should be achieved in the next 5-10 years, in ‘Medium Term Goals’ section.
Put the goals that should be achieved in the next 10-15 years, in ‘Long Term Goals’ section.
And voila, you have your financial goals. Well-defined financial goals.
Now all you have to do, is work hard to make that much amount of money.
Or, you can also, hire a professional like 7Prosper, to help you in coming up with appropriate investing strategies, i.e. making your money work for you in order to achieve these financial goals.
I keep on saying, don’t try to come up with investment strategies yourself, because there will always be a difference between you doing a job and a professional person doing their job.
You can read more about it here: www.7prosper.com/post/should-you-invest-in-stocks-directly-instead-of-mutual-funds
Happy financial planning.