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Financial Goal Setting - Four Steps There are no hard and fast rules for implementing a financial goal

setting plan. The important thing is to at least do something as opposed to nothing, and to start NOW.
Here are four steps you can apply to any financial goal setting exercise: Step 1: Identify and write down your financial goals, whether they are saving to send your kids to college or University, buying a new car, saving for a down payment on a house, going on vacation, paying off credit card debt, or planning for you and your spouse¶s retirement. Step 2: Break each financial goal down into several short-term (less than 1 year), mediumterm (1 to 3 years) and long-term (5 years or more) goals; which will make this process easier. Step 3: Educate yourself and do your research. Read Money magazine or a book about investing, or surf the Internet's investment web sites. Step 4: Evaluate your progress as often as needed. Review your progress monthly, quarterly, or at any other interval you feel comfortable with, but at least semi-annually, to determine if your program is working. If you're not making a satisfactory amount of progress on a particular goal, re-evaluate your approach and make changes as necessary. Sometimes when people write down their goals, they discover that some of the goals are too broad in meaning and nearly impossible to reach, while others may seem smaller in scope and easier to achieve. Break your goals down into three separate time categories. B y placing a time frame on your goals you are motivating yourself to get started and helping to allow you the chance to succeed. Just remember that you can adjust the time frame whenever you want to. Long-term goals (over 5 years) are those things that won't happen overnight, no matter how hard you work to achieve them. They make take a long time to accomplish (hence the reason they are called long term goals), so give yourself a reasonable amount of time, that are based on your best estimates of what it will take to achieve them. Examples of long-term goals might include college education for a child, retirement plan or purchasing a home. Whatever the case, these goals generally require longer commitments and often more money in the end. Intermediate-term goals (1-5 years) are the type of goals that can't be executed overnight but might not take many years to accomplish. Examples might include purchasing/replacing a car, getting an education or certification, or paying off your debts like credit cards etc. (depending on the amount).

You might be wondering where to start with your financial goal settting plan. These are some basic tips to help you in making the best choices for you. it is best for you to go out and do some research to find the method(s) that suit you best. The steps to setting goals successfully don¶t change. mutual Funds. . There are many more and all can assist you in short and long term goals. work to get noticed. work to save and invest money etc. RRSP¶s. you need to make up a list. based on the date the task is needed.Short-term goals (within one year) generally take one year or less to achieve. ‡ Start making a budget for yourself that leaves you with some extra money and follow it ‡ Use your coupons that is why they are there. decide which timeline your goal fits into. for relationships. It¶s that simple. After looking at these tips. For example: when it is career wise. ‡ Begin by taking 5%-10% out of each pay check and put it in a savings account ‡ Look into different investment strategies such as IRA¶s. only the methods that you use to go about it. It seems like small savings. then take action toward reaching those goals. What are your goals? To find out. in financial goal setting. work on maintaining your intimacy or getting it back. stocks. personal investments etc. and the required savings. but add together you could save 20-30 dollars at each trip to the market ‡ Shop around for bargains ‡ Do not live outside of your means ‡ Work with a credit counselor to get help in lowering your monthly expenses and get rid of your debt These are just some of the things that you can do when beginning your financial goal setting plan. detail the steps necessary to achieve your goals. the total estimated cost.

which I was first introduced to as a new hire at my one and only Big Corporate Job back in the day. Realistic. Then it will be a goal. Attainable. like saving for a vacation or buying a house. Saying. My writing goals are more concrete and attainable. ³I want to save for a family vacation. the easier it will be to measure your progress. it¶s a wish. and I can easily check my progress as I go along.What¶s a smart financial goal? Getting rich isn¶t a goal. I¶ve encountered it in a few different venues since then.´ I know exactly how much I need to save. from getting clarity on what you want to staying motivated for the long haul. give yourself a concrete timeframe you want to accomplish it in.K Rowling! That¶s not a goal. it¶s a daydream. like selling a story to a particular magazine or being able to quit my day job and write full time. that¶s fine. The same is true with other goals. Do your homework and figure out how much you need to save to have the income you¶ll want when you retire. and that number can be the basis of your goal. I kind of feel the same away about goals. Measurable. When you make a goal. Timely. I get closer to being able to write that book. Why do I need goals? Goals are incredibly powerful tools. Don¶t just aim to ³save for retirement´. Figuring out how much to save each week becomes a simple math problem. . Even better if it hits the bestseller list! I¶ll go on Oprah! I¶ll get a six-book deal! I¶ll be the next J. It¶s totally unrealistic. Now you have a number. A goal needs certain characteristics to have power. Doing so is on my ³bucket list³. attainable steps. ³I want to save $5. Remember how I said ³getting rich´ isn¶t a goal? For a goal to work. it needs to be specific. They¶re useful for a diverse array of things. and always found it useful. you need to know how well you¶re doing at achieving that goal. Goals need to be realistic and related to your real life. you can¶t really measure your progress. They build on what I¶m doing now. and display it proudly on my bookshelf. I can easily fantasize what it will be like to hold my own finished book in my hands. and how much time I need to do it in. But they need to start with small. specific.000 for a trip to Argentina over the next 18 months´ is a much more attainable goal than saying. The more specific you can be in your goal. The SMART system teaches that goals must be: y y y y y Specific. Each time I attain a goal. but doing so isn¶t a goal of mine. Notice that I¶ve talked here about my savings goals and my professional goals. wrote the other day about all the creative and flexible ways he uses the data he collects from tracking his spending. Once you have a specific goal. I like the SMART goal-setting system. A goal needs a timeframe. I can look at my retirement accounts and see exactly how much progress I¶ve made towards my specific savings target. If you want to make radical changes to your life. I¶d love to walk on the moon someday. When the time comes. J. I¶ll get real specific about what book I want to write and what steps I¶m taking to do it. Goals can help you do that. Without it. I¶d love to write and publish a book.D.

goals help me stay motivated. Goals act like a map. sorting your genuine aspirations out from your daydreams. you can check your actions against it. Finally.000 for Argentina´. then you will be randomly investing and as your goals in life comes along the way. When you¶re in a shop considering a purchase. specific intentions with concrete. ³Save $5. on the other hand. Your goals can guide you to financially sound choices.The process of goal-setting is a great opportunity to learn more about what you value. achievable steps to get to them. however you didn t give much thought to it from many years or months and at the end you have to take decisions in hurry. investigate IRAs and study the stock market. You get to see your dreams and aspirations take shape as clear. Once you have your goal in place and you know how you want to get there. which you don t want to take. The first step involved is to know where you want to go ? If you have no goals set . Once you¶ve set the goal. you can check your progress on your goal. How to set your financial goals ? One of the most important part of financial planning is goal setting . for example. you can ask yourself if it furthers your goal. you¶ll want to lay out a plan to do so. Let¶s say you want to save for retirement. Whenever you go over your monthly spending. and watch the savings in my travel account slowly creep towards that goal. ³Save 10% of my income´ might be a good idea. Once you know how much money you want to save and how many years you have to save it. you fulfill them. By setting your financial goals in advance you can get a good idea of what lies in future and start preparation for it (Goal of financial planning) . It can happen many times that you are not prepared and some important goals is near by. This is your chance to learn about your company¶s retirement plan options. is a compelling goal. I can use pictures of the locations we want to visit to help keep me energized about it. It¶s a chance to learn more about how your goal can be achieved and make some choices about how you¶ll get there. but it¶s not a very sexy goal. figuring out how to progress towards it and achieve that progress is another learning opportunity. It¶s easy to stray from that principal in the face of tempting travel plans and summer camp tuition for the kids. It helps you focus on what really matters to you.

Many people I talk with. That means goal being measurable . It¶s a great thing to dream for a big house. say ³I want to buy a big house´ . It should not happen that you have a rough idea of the goal. Look at returns from Real Estate in India Measurable : Your goals should be measurable in terms of ³How many´ or ³How much´. Lets see what those 5 important element of goal setting is . you should be able to track your goal.What is goal setting ? Goal setting is a process of defining your goals in Life. but at some point in life you will actually decide the actual size and how many rooms and what will be the area. which makes it SMART . however ³I want to buy a 3 BHK Flat in Karvenagar area in Pune costing around 35 lacs within next 5 yrs´ is a more specific goal which gives a clear picture to you . ³I want to buy a 4 BHK house in 5 yrs´ will mean you can exactly find out how much you need to save per month so that you can achieve the goal with higher accuracy. It should contain detailed information and should not leave a room for further questions . There are many important and intuitive characteristics of any goal. . ³I want to buy a house´ is a very general goal . Specific : Your goals should be specific and not a very general one. Not having a clear view means no idea of how much it will cost and then you can¶t save for it properly .

d) I have no long-term goals of buying house. where I can personally do ³Vegetable Agriculture³. a) As I like to travel a lot so I would like to generate enough money in next 15-20 yrs . because that¶s not you really wish to and even if you some day achieve that goal which you planned.Achievable : This mainly means that your goals should be achievable given your current situation. pulses. (I personally have experience of growing things like corn. cabbage. whereas your goal is ³To crack CAT exam´ ? If this happens . Mid Term and Long Term and each of them will have ³High Priority´ and ³Low Priority´ . Example of Goal setting Very simple way of doing this is to categorize your goals in Short Term . c) I would not like to save much for my child marriage. If you are saving Rs 20. Just because you are hiring a financial planner does not mean that he is a magician and will somehow create a strategy for you . Now what do you do ? Do you save 5. Fine ! .000 and for how long . Lets see some of my personal goals in life .000/KG so we bought 1 gm . Do you know hybrid tomato seeds can cost upto Rs 75. I dont believe in lavish marriges anyways . peas . peanuts. carrots. as I would like to encourage them for love marriage and settle things with a simple ceremony . radish. dont target ³3 BHK House in 5 years without loan´ as one of the goal because it¶s not possible given your current situation. chana. almost all green vegetables. it would be tough to sustain the enthusiasm and energy. potato. b) I would like to build a Farm Land by year 2035. This way you have a clear idea of what is important and first preference in all the time frame . you will start with some enthusiasm in start but at some point. You have to make sure your goals are very much what you wish in life . tomato. It¶s important to set a time line so that you have a clear idea of how much does it take to achieve some goal. the first thing is you will not be able to define how you can achieve them in the first hand. For example . I would rather like to live in rent for long and build a corpus in pure equity + debt . so that I can travel to different countries every 6 months . onion . If things changes and one day I feel real estate is something which should really be part of my portfolio. If you put a lot of unattainable goals.000 per month or 20. Yes I have done it in UP at my hometown as a hobby. vegSeriously. it would not make sense because it¶s not aligned with your life objectives. Relevent : What will happen. . one of the major issues is targeting unrealistic goals in life. When financial planners start working with some client. cauliflower. This is very much true for financial goals also. that¶s all .000/ month . do you want to buy that 55 lacs flat which is µalmost¶ out of city and commands a rental yield of not even 3% ? Do you ? Timely : Imagine your goal is like ³I would like to buy car of 5 lacs´. You can calculate the investment needed for that (See how to calculate) . if you always wanted to become IAS officer. I will change my mind . garlic) .

then you don¶t have a clear idea of reaching there. If you do not have a goal set with some target amount and target date. Mid term goal . you need to understand its importance and its impact. Mid Term goal . Let us see the full example of Goal settings High Priority Short Term (<3 yrs) y y Low Priority y Sister Marriage contribution: 3 lacs in 2012 Initial Child Expenses : Rs 2 lacs in 2015 Abroad vacation with spouse : 5 lacs in 2016 Child Higher Education : 40 lacs in 2035 Buy a Car in 2013 : Rs 3.08 crores { 10 X (1 + 10% ) ^ 25 }. where as ³I would like to take a 2 weeks vacation in Kerela with my family worth 50k . can be a Low priority.y y ³I want to buy a Car worth 6 lacs in next 5 yrs. Financial Planning is all about achieving goals in the best possible manner by considering your current situation. then considering a 10% education inflation (historically it stands at 10%).000 per month starting in year 2030 y y You might want to look at subra¶s post on Financial Resolution . Imagine a goal of ³Child Education´ which costs Rs 10 lacs in today¶s value. Now lets take 3 scenarios with return assumption of 12% per annum . . the target amount will be 1. If your target date is after 25 yrs. Importance of Goal Setting with an Example Even though it looks nonsense.5 lacs Mid Term (3-6 yrs) y y Invest in a unique startup idea in year 2016 : Rs 2 lacs y y Long Term (7+ yrs) y 60% down payment money for a house : Rs 45 lacs in 2025 Retirement Corpus : 5 crores in 2035 House in a small town : Rs 15 lacs in 2025 Passive monthly income of Rs 50. which can accommodate around 5-6 people´ can be a High priority . it gives a good idea of how you should start and stick to financial goals .

500 per month for next 15 yrs . 3) You do not plan for it and start saving at later point Incase you do not plan for it and lose the starting years of your earning life and once your child is 9-10 yrs old (suppose you lose 10 yrs) and then you start thinking about the higher education . or planning for retirement. and put this action plan to work. If you're not making satisfactory progress on a particular goal. Step 2: Break each financial goal down into several short-term (less than 1 year). or surf the Internet's investing web sites. whether they are saving to send your kids to college. So you can start an SIP today and consistently start investing for this goal . medium-term (1 to 3 years) and long-term (5 years or more) goals. then you just need to save 7. or a book about investing. paying off credit card debt. you can reach the target . With a little effort you can learn enough to make educated decisions that will increase your net worth many times over.1) You plan for it and start saving for next 25 yrs In this case . 2) You plan for it and save more in the starting years In this case . you will have to save Rs 5. but at least semi-annually. saving for a down payment on a house. Review your progress monthly. to determine if your program is working. Step 4: Evaluate your progress. If you get 12% over long-term . Step 3: Educate yourself! Read Money magazine.800 per month for next 10 yrs and then leave the money to grow for next 15 yrs . measurable steps you can take to achieve these goals. or at any other interval you feel comfortable with. going on vacation. FOUR SIMPLE STEPS FOR SETTING FINANCIAL GOALS Step 1: Identify and write down your financial goals. then to meet the same goal you need to save 21. and you do not deviate from your goal and consistently invest with discipline . Then identify small.710 per month for next 25 yrs . quarterly. The stock market is not voodoo. Meaningful financial goal setting allows you to: y y y y y y y have focus track your financial progress visualize your ideal future motivate you to turn your vision into reality allow you to concentrate your efforts for success have long term vision experience short term motivation . lets assume you can save more money in the starting 10 yrs and then do leave your money to grow for next 15 yrs . re-evaluate your approach and make changes as necessary. buying a new car.