Goals drive our actions.
Suppose you plan to score 70% in an exam. Your action plan, or in this case, your preparation plan, will be based on this goal. Your action plan will have answers to questions like what portions of the syllabus to cover first and how much speed to maintain throughout the exam to attempt the maximum number of questions.
In the absence of a goal, we will not be able to formulate a proper plan. Without a plan, we may often lose our way and become directionless at one point of time.
When we make plans, we spend less time trying to figure out what to do next. Thus, planning benefits us in many aspects of our lives. However, these plans cannot be implemented if we are unsure of our overall goals. Even in the financial element of our lives, planning and setting goals helps us in making our money work for us.
Before we discuss about financial goals, it is important to note that the fear of not being prepared with a well-developed plan may sometimes lead to increased levels of stress. Taking some time to process and comprehend your financial goals and planning accordingly can help cope with this stress.
What are Financial Goals?
Objectives that guide our financial decisions and provide us a direction for the betterment of our financial future can be called financial goals. In other words, these goals are the targets that we set for our money, that can be long term or short term.
Do we care enough about setting financial goals?
According to a survey called India’s Life Goal Preparedness Survey by Bajaj Allianz Life,
“Indians are very optimistic about achieving their Life Goals. However, these same respondents, when asked about their preparedness to achieve the goals, admitted that they were not aware of the financial instruments that could help them get these life goals done.
The biggest barriers to achieving these goals as per the respondents is a lack of financial planning, and a lack of time.”
In this article, we present the 8-step roadmap to achieve your financial goals.
1. Introspect and discover.
Every individual has different priorities. So, to be able to set clear financial goals, the first step is to know your expectations and priorities. In other words, you will only be able to achieve what you want, when you know what you want. Hence, it is important to gain clarity and align your financial goals with your personal values. Understand what your inner self wants and expects from your hard-earned money and act accordingly.
2. Map the destination.
After you have a clear understanding of your priorities, it is important to sort them into two categories- short-term and long-term. For instance, if paying off your debt is your top goal, you will try to do so in the shortest possible period. This makes it a short-term goal. Alternatively, you get a relatively longer period of time to build a sizeable corpus and plan for your retirement. Since this goal doesn't have to be accomplished in the near future, it is a long-term goal. Therefore, it is possible to calculate the amount of time needed to accomplish a goal only when you are aware of your destination.
3. Set SMART goals.
Along with being literally smart, your financial goals must also align with the abbreviation SMART that stands for,
Specific: Financial goals that are specific defineyour targets clearly and help you in working towards achieving them effectively with enhanced focus.
Measurable: Easy to measure goals help you monitorand evaluate your progress and find any room for improvement in your action plan.
Achievable- Practical and realistic financial goals are more achievable as they align with your available resources and current financial situation.
Relevant-It is relatively easier to track progress of meaningful and relevant financial goals.
Time Bound- A timeline helps in monitoringyour progress and staying focused.
4. Fix a timeline.
This phase is interlinked with the destination mapping. When you know where you're going, it's easy to estimate how long it will take to get there. For example, if your financial goal is to save money for the down payment of your house, setting a deadline will help you to track your progress and create accountability. Apart from this, sorting your financial goals as long term and short term also helps in building a timeline, depending on the desired financial outcome.
5. Develop an action plan.
It is important to put together your financial goals and develop an action plan as it helps you to break down your financial goals into easily manageable steps. These steps are actions that you can take step by step to reach your goals. An action plan is a roadmap and successfully accomplishing every step of it will ultimately lead you to your financial goals.
6. Comply your goals with a budget.
You must avoid exceeding a specified budget for any financial goal that you wish to achieve. When you break your budget, you not only overspend, but you also lose enthusiasm and drive to keep walking towards your financial goals. As a result, in order to stay on track, it is critical to stick to a budget and ensure that your financial goals do not place an undue burden on your daily expenses.
7. Track your progress.
When you begin your action plan, you must monitor your progress and accomplishments at each stage. This allows you to identify areas for improvement in your action plan and alter it to better align with your goals. No action plan appears to operate perfectly at first. It is only after a while that you begin to see the genuine results. These findings are what let you determine whether you are on the right course, plus analyse your progress, which also serves as a great source of motivation on your way to achieve your financial goals.
8.Save and invest.
This step is frequently overlooked when we are focused on achieving our specific financial goals. Savings and investing are interconnected. Mindful saving helps you to generate enough corpus to make investments. Also, it helps you to meet unexpected expenses without affecting your investing portfolio. Hence, savings must become a habit rather than a goal.
Similarly, investing allows us to grow our money and receive higher returns over time. When you invest with discipline over long period, by the advantage of compounding, you will be able to achieve your financial goals.
Financial goals are considered milestones because they mark major achievements on our financial journey. They act as checkpoints along the road and allow us to acknowledge our success on every step of the way. When we reach a milestone, we gain confidence and feel motivated to move forward towards our next goal.
Along with this, we must know that discipline is the key in achieving our goals. A disciplined approach keeps us from spending money impulsively and allows us to stay focused. Along with this, we must be flexible to the changes that occur along the way to reaching our financial goals and grasp them in order to review our action plan and strategy. When we combine the discipline and flexibility with our action plan, we may efficiently navigate the ever-changing financial circumstances and achieve our financial objectives.