Things To Consider Before Finalising Financial Goals

Things To Consider Before Finalising Financial Goals

The purpose of financial planning is to achieve your goals. Your goals help you to shape your investments as per your requirement. Therefore, you must be very clear about your goals before you start planning your finances. Your financial advisor will also be able to help you better if you are clear with your goal. Here’s what you should consider before finalising financial goals.

Differentiate between goal and dream

Goals are different from dreams. One has many dreams but not all of them may be realistic, whereas a goal is definite, realistic and achievable. For example, if you are a small or mid level employee and your wish is to vacation abroad every year, this dream seems a bit far-fetched. A more realistic goal would be to plan a vacation abroad in next 1-3 year, depending on your budget. Once you differentiate your goals and dreams it will be easier for you to plan your investments accordingly.

Keep inflation in check

While planning foreign education for your child or planning a foreign vacation in medium to long-term, the inflation should be considered not only for home country but also the country where you are planning for the education or vacation. The inflation rate for the two countries may differ and will impact your calculation of the expenses that will be needed. It will also help to check how lenient the country’s policy is for foreign students in terms of education and employment.

Think long-term

Don’t just set your goal on something just because it seems affordable in the short or medium term. Instead check whether it will still be viable in long term. A newly married couple may think about buying a 1 BHK house as it might be affordable to them. However, if they plan to have children in the future, the same house will become too small for their needs. They will also have to go through the process of searching for house, buying house and paying stamp-duty and registration all over again. It will be better for them to wait a couple of years more and invest more to be able to buy a bigger house.

Do you really need it?

A simpler, inexpensive alternate might be available for your target needs which will make saving up for your goal redundant. For example, buying a car nowadays is more of a liability than asset. The traffic situation is getting worse every passing day and cheaper and better alternatives in the form of public transport, taxi aggregators are easily available. People also generally take up loans for purchasing car and they end up paying more than what it is worth.

Retirement planning

Though it seems far away do not forget to start planning for your retirement. With your retirement goal you should be able to take care of your household expenses, medical expenses, etc. You might also have other retirement goal such as children’s marriage or higher education, hobbies, vacation and so on. You will thus have plan what will be and what not be feasible for you once you retire. There might be some expense that will reduce but there will be some new one that may add up.

Rohit Grover
Rohit is a senior certified financial planner at Moneyfrog.in. He is part of Moneyfrog’s research team and keeps track on the fund movement & the market.
He is an expert with numbers. Formulas & analytics.

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