Renowned author, Napoleon Hill, very rightly once said, “A goal is a dream with a deadline.” But what about financial goals? They’re not very different. Or are they?
You might say that you want to be financially independent. But that’s not a goal, that’s just a dream. A goal requires you to spell out exactly what it actually takes to achieve this dream.
Why is goal setting important?
Imagine walking to a destination with absolutely no facts known. How far is this place? How long will it take to get there? Can you get there on foot, or do you need another mode of transport?
When it comes to planning your finances, goal-setting is one of the most important exercises you could do. Nobody tells you this, but it’s something you need to hear and something you must be doing.
Goal-setting basically means that you’re charting out the “SMART-est” possible route to your destination. By SMART, I mean Specific, Measurable, Achievable, Realistic and Timely.
Unfortunately, forget about SMART goals, financial planner, Peter Dunn says, “Very often, people don’t set any goals because they don’t like being told they failed.” If you want to be financially successful, it’s imperative that you overcome this fear of failure.
Start small
Starting small helps tremendously. While it’s important to have a big goal, it’s even more important to break this big goal down into smaller, more easily attainable goals.
For instance, let’s say that ever since you started working, you haven’t saved or invested much. Your big goal is to build up a solid retirement fund. Now break this down into smaller goals – Start with investing ₹1,000. Next month, double it. Keep setting bite-sized goals like this. Once you start winning at these goals, you’ll find this process gets easier with time. You’ll also find that you’re slowly being much more accountable with your money.
How does one treat extra income?
Now, let’s say you get some windfall gains, like a bonus or a commission or an income tax refund. If you’ve set your goals right, every rupee you earn knows what it needs to do next. Without any goals, you’d probably fritter this amount away or maybe not put it to use the best way.
It’s the end of the first month of 2020. The weekend is here. Take some “me-time” and list out your financial goals.
Here’s how you can go about the goal setting exercise:
- Make sure each goal has 3 components to it – What, When, How Much
- Your goal could be of three types – consumption goals (like buying a DSLR), debt elimination goals (like paying off your student loan), wealth creation goals (like accumulating funds for retirement)
- Once you’ve got your goals in these 3 buckets, classify them based on time, as immediate (within 1 year), short term (1-3 years), medium term (3-7 years), long term (more than 7 years)
- Use the Rupiko Excel Utility, put these details in the yellow boxes and take a look at the suggestions on how much you should be setting aside every month
(CLICK HERE TO DOWNLOAD THE EXCEL UTILITY) - The sheet also tells you where you can invest to accumulate these amounts in the time-frame you’re looking at
These goals are the building blocks of your financial success. One block at a time, one goal at a time, you create momentum towards a financially healthy and happy life.
I’d love to hear what your top goal for the next 30 days is, so drop in a comment below. Talking about it is a great way to begin. 🙂
