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When you step out to go to the market, do you tell the rickshaw vala about where should he take you or do you ask him to take you wherever he wants to take you? You have a set destination in mind and you ask the rickshaw vala to drive accordingly. Why not apply the same approach in financial planning?

What is goal-based financial planning?

We always start anything new with a plan and work towards achieving the final goal. In this journey, we constantly check up on the progress and the status of our journey towards reaching our goal. Similarly, to meet our financial goal as well, it is equally important to sketch out a plan to achieve the end goal.

How to do goal-based financial planning?

• Identification of a goal: The first and foremost step is to identify the end goals/objectives and prioritize your goals accordingly. For someone it might be to first buy a car, then buy a house and then invest for child’s education, and then the child’s marriage, a family vacation and the list is endless. Prioritization of these goals is very important and crucial.
• Setting value and time to a goal:Just like we say one day at a time, set one goal at a time and work towards it. The next step in this process is to set a value and time frame to the goal. If your child is in 6^th std. and you want to invest for his higher education in Medical, you know that you have 6 more years to save up for the amount required to admit your child in a medical college.
• Investment Planning:With the help of a professional, understand the procedure of investment planning. Savings are important but investment is better as it gives you additional income on your savings and helps you achieve your goal faster. There are different paths in this journey and based on your set value and time, you will have to choose the investment path you want to follow. Your path may be insurance, SIP in mutual funds etc. The selection will depend upon the time and your risk-taking abilities.
• Execution and budgeting:Sit down with your advisor or conduct a research on the process and start investing regularly. Every single penny counts, hence small contributions regularly will help you fulfil big dreams in the future. You can start with investing less and then taking the amount higher as per your convenience.  
• Monitoring your status:It is very important to check your progress at every step of the plan. This supervision will help you with understanding the process of investment better and will also motivate you as you are constantly seeing the progress of your investment. A monitoring plan with neither more nor less supervision is necessary.

Goal-based financial planning has various benefits to the investor:

• More focused approach: We all agree to the fact that our mind is more focused when there is a plan of action in place and the end goal is clear. However, when you set a financial goal as per your needs, your mind is more focused and determined to achieve that particular goal. The path is not directionless in this approach.   Will give you a clear idea of what you’re doing and what you want to do with your hard-earned money.   
• Desired time-period: The time period of achieving a particular financial goal may vary from person to person. Individual A’s son would be in 8^th std. and wants to do engineering after 12^th, so he has about 4 years to invest and make enough money to provide for his son’s engineering fees. Individual B’s daughter would be in 4^th std. and wants to become a lawyer so B has about 8 years to invest and make enough money to send her daughter to a renowned law college. In this scenario, both A and B want to invest to make enough money for their children’s education but their time period and set value is different, hence their path of investment will also be different than each other’s. A goal-based financial plan gives you clarity of thought.  
• Easy decision-making: Once a financial goal is set, it is easier for you to prioritize your expenses and make financial decisions easily. This will also give you and your financial advisor a better understanding on the purpose of investment and achieving desired goals within a particular time frame.

Who can do goal-based financial planning?

• Goal-based financial planning can be done by anyone who invests a certain amount of money regularly without fail and has a set goal in mind. Anyone ranging from young parents for their kid’s education of adults for their retirement plans, individuals for their dream vacation or a dream house can do goal-based financial planning

Goal-based investment is a smart and an efficient way of investing for a certain period of time to fulfil the desired objectives. It can be done by anyone who is determined, saves a certain amount of money regularly and is dedicated towards achieving the set goal in mind.

It is a myth that only rich people can do goal-based financial planning. But everyone can do it starting with as low as Rs. 1000

For better guidance or a better companion for your goal-based financial planning journey, you can consult Sacred Wealth Advisory.