Money is a topic that never goes out of context. With each life stage, our needs change making us re-think our priorities. There never is a moment when losing sight of financial situation is an option. Like moving from student life to a new job or pacing towards retirement from stable income years, money matters never cease to be. It is up to us whether we want to see that as a nag or a friend that makes our wishes come true.

With some planning and proactive steps, finances can bring a lot of peace and freedom. This Independence Day we kick off a series on ‘Achieving Financial Freedom’ which will cover definitive steps to the ultimate Money Nirvana. This article covers the fundamental step of ‘Goal Planning’.

Starting out
There’s no end to whims and fancies so setting financial goals may seem over whelming at times. A S.M.A.R.T strategy to goal setting is a sure shot way to experience Financial Nirvana.

SPECIFIC: List down dreams

• We have to carefully list down our bucket lists. Whether it is something in the next few months like a vacation orfew years away like children’s higher education, it must be identified.
  
  The process may require some thinking. We should take on board partner’s or family’s views while setting goals. The sharper we define our goals, clearer comes out the plan of action. However, goals can be re-calibrated, so anything missed can always be added later.

MEASURABLE: Use numbers

• Our goals should be measurable. Like for child’s higher education, instead of aiming a vague amount, the smarter way is to project numbers. For example, if higherstudy costs Rs. 15 lacs today, some 15 years hence it will inflate to Rs. 41.3 lacs (assuming inflation hits us at 7% year on year).
  
  So, while setting goals, we should aim to define the amounts required for each of them. Making goals MEASURABLE increases chances of achieving them by planning adequately for them.

ATTAINABLE: Prioritize

• The most important thing in goal setting is getting one’s priorities right. It sets the base for allocation and selection of investment choices. For e.g. it’s important to prioritize between paying off Home Loan and upgrading car. The latter can be achieved in short term while former may be a mid-term goal. Both the goals require dedicated time and investments, so having clarity makes them ATTAINABLE.

REALISTIC: Make budgets

• Our goals should be in line with our income and investment capacity. Being over ambitious while goal setting may lead to disappointments later. Likewise, setting sub optimal goals will lead to poor planning and results. Making a monthly budget will highlight inflows, outflows and surpluses. The surpluses should decide actual allocation to goals as against investing arbitrarily any amount.

TIME BOUND: Set a timeline

• Just like having targets strives us to achieve them, SMART goals need to be set against target time horizon to see them through. Another reason why setting a timeline is important is because the suitable investments products can be chosen only when there is a time period involved.

Many of us want Financial Freedom but find it invincible. Contrary to perception, it is a simple process driven pursuit that requires patience and disciplinewith rewards that can multiply the joy of everyday life.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.