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Here’s What Could Make Or Break Your Financial Goals   Dec 06, 2018


I grew up hearing a lot about my aunt Sheela; she was a vivacious person, full of aspirations. She wanted to own a penthouse but never accomplished this goal. Eventually, she spent her whole life staying in a rented apartment.

And my father would repeat this story to remind me not to aspire too much. If you failed to achieve what you wished for, it would be disheartening, and of course, even demoralising.

I'm a firm believer of the popular adage, "If you fail to plan, you are planning to fail!", attributed to Benjamin Franklin (the founding father of the United States of America, statesman, political theorist, polymath, investor, and distinguished author).

So, I sensibly refuted my father's point, expressing that aunt Sheela could have fulfilled her aspiration had she planned – set it as a financial goal and worked towards achieving it.

We all aspire for buying a dream home, a car, or going on a vacation abroad. These are linked to our financial goals, which include the very vital ones – child's future needs (education and wedding expenses) and retirement. If you plan for them well in advance, you can achieve your aspirations. But if you don't, then you are merely day-dreaming, living in a fantasy.

It isn't only about my aunt Sheela; there are many individuals who envision a variety of goals but live with certain behavioural biases.

[Read: Are These 6 Behavioural Biases Preventing You From Investing?]

You will have financial independence and realise your financial goals only when you plan. However, many do not even realise that they are obstructing their financial growth and freedom.

Let's look at what they do.

  1. Procrastinate

    'Procrastination is the thief of time.'

    You lose out on opportunities to achieve whatever you want in life, not just financial goals.

    When you plan for your financial goals, pay attention to the time-value of money and determine the value of your financial goal sensibly. Remember that inflation erodes the purchasing power of your hard-earned money. Therefore, the earlier you plan, the better it is.

    With a sufficient investment time horizon and prudent investments, you could build the corpus to accomplish your envisioned financial goal. And, you're never too young to begin planning for your retirement.

    [Read: Sachin Tendulkar, Rahul Dravid, or Virat Kohli – Who Are You When It Comes to Your Retirement?]

  2. Not setting S.M.A.R.T. Financial Goals

    “Setting goals is the first step in turning the invisible into the visible.” Tony Robbins

    If you want to live your dream, it is imperative to set financial goals. When you set a goal, ascertain the answers to these questions:

    -Is my goal important?

    -Is it a goal or a wish? 

    -How much money do I need to accomplish each goal?

    -Do I have adequate resources to finance my goals on time?

    -Is my timeline realistic, or am I miscalculating?

    And if you have many financial goals, prioritise them into short-term (less than 3 years), medium-term (3 to 5 years), and long-term (over 5 years).

    In the entire goal-setting exercise, ensure your financial goals are:

    Specific

    Measurable

    Adjustable

    Realistic 

    Time-bound

    [Read: How to Set S.M.A.R.T Financial Goals]

  3. Do not have a financial plan after goals are set

    Even after setting financial goals, most individuals fail and have a hard time achieving them, simply because they do not have a financial plan – a roadmap to achieve the envisioned financial goal.

    Pablo Picasso rightly expressed, 'Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.'

    [Read: What's Your Financial Philosophy While You Make A Financial Plan?]

    If you start working on your financial goals with a prudently drawn up financial plan in place, your goals are achievable. prudently drawn up financial plan in place, your goals are achievable.

  4. Find it difficult to control excessive spending

    'Old habits die hard.'

    Abiding by the financial plan diligently is difficult when you are a spendthrift, impulsive spender, and/or a shopaholic.

    Legendary investor, Warren Buffet, aptly guides us with his famous quote:'Do not save what is left after spending; instead spend what is left after saving'.

    If your hard-earned money is wisely utilised by engaging in a sensible budgeting exercise, it can result in enough savings. This, in turn, can be deployed towards productive asset classes (consider SIPs in the direct plan of mutual funds) in accordance with your financial plan.

    So, follow your financial plan, keep reviewing it regularly, and control/change excessive spending habits, and invest your savings in the interest of your financial wellbeing.

  5. Happy in your comfort zone

    If you know what you want and have a timeline to achieve it, then taking a certain amount of calculated risk would be helpful in generating good returns and achieving your financial goals to fulfil your aspirations.

    When you are addressing long-term financial goals for more than five years away, there's no point being in your comfort zone and investing in bank Fixed Deposit FDs, which are tax inefficient.

    "Risk comes from not knowing what you are doing."—Warren Buffet

    [Read: Can Fixed Deposits Help You Retire Comfortably?]

  6. Impatience

    It could be quiet annoying to not see results in a short time-span. Once you've invested in a particular asset class, do not get restless and fall prey to quick-rich schemes if you don't see your investments growing in a short time. These could be scams.

    If you've invested in the right investment avenues in accordance to your financial plan, there's no need to worry.

    Remember, wealth creation to accomplish financial goals is a journey – and investing is a marathon, not a sprint. Impatience can do more harm than good.

To conclude….

'By changing nothing, nothing changes.' —Tony Robbins

Take control of your personal finances and work towards accomplishing your financial goals. The key to your financial success is in starting financial planning right away.

Want to draw up a holistic financial plan to accomplish your financial goals, but you don't know how to begin?

You can reach out to PersonalFN's Financial Guardian on 022-61361200 or write to info@personalfn.com. You may also fill in this form and our experienced financial planners will reach out to you.

PersonalFN is a SEBI registered investment advisor. We will be happy to help you.

 

Author: Aditi Murkute



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