Making goals count financially

Goals: They seemed to be everywhere while the Euro 2012 was being played out on our television screens till yesterday. However, while the nation obsessed over the goals scored by Spain, Italy and Portugal have you ever stopped to consider about your personal goals?

In my experience of being a financial advisor in the last two decades, I have rarely come across people who are conscious of their personal goals in life. Most of us, caught in our daily routine of work, only concentrate on goals defined by bosses at work. Some of us do try to save money from our salary, but this saving does not translate into effective investing.

Saving is defined as what is left of your income after meeting all your expenses. Investing on the other hand is managing your expenses while using part of your income to meet your future goals. However, random investments will only give you random results. If you want your investments to work for you, you need to start aligning investments with your goals. Follow the steps below to create goal based investments:

Know your goals : The first step in creating any plan is identifying your objectives. What are the goals you want to achieve? A car for yourself ? A European holiday? Planning a baby? Clearly define your goals and then articulate the same in financial terms. This process will tell you how much you will need for different goals. For eg – go to Europe next summer - cost R 3 lakh

The Time factor: Goals need to factor in time lines. The time horizon over which you want to achieve your goal determines two things – the amount of risks you can take while making investments and the choice of instrument where you can invest and the resultant returns you are likely to get. Also, you can try and determine goals which have a relatively flexible timeline. For eg – you may be able to postpone buying the new Galaxy S3 by two more months but cannot postpone paying for your daughter's MBA college fees.

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