Goal Setting is deciding the end-point of your planning exercise – determining where you want to go. The more tangible your goals, the easier it is to plan for their realization. Begin by listing both your short and long term financial goals. Short-term goals are things you want within the next five years – a car, funds for an upcoming wedding.
Be aware that short-term goals leave you with lesser flexibility in planning. If your short-term goals require extraordinary returns on your investments, it’s time to do a little prioritizing. Drop some of the goals; push some for later; make tradeoffs – pick a Maruti 800 over a Santro if it is critical to buy a car.
Next, list out your long-term goals. These can stretch over a period of 10-30 years.
These goals could include: available cash for emergencies, education for children, care for family members, retirement, a nest egg to permit a career change, buying or selling a business, estate planning, financial independence or personal objectives such as a special vacation or second home.
Remember to rank these goals in order of priority too. The idea is to know your goals with a mathematical precision so you can play around with options, and re-allocate investments and expenses without contemplating over it every single time. The crisper your goals, the more easily you can pull off the whole game with whatever you have to begin with.
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