In the recent mid-quarter money policy, RBI had raised key interest rates by 25 basis points each to rein in inflation.
As a result the short-term lending rate stands at 8.5 per cent and the borrowing rate at 6.5 per cent. EACH one of us is working hard, day in and day out, in order to reach to desired goal. Every year millions of people make fresh resolutions, that are never achieved because they are goals, that sounds great at the time when they are made but turn out to be completely unrealistic.
Talking about personal financial goals, life is full of choices. In this materialistic world of ours, more often than not, most of us have a list of financial goals that we wish to achieve in quick time. What is important here is to keep one's entire financial position into perspective while defining the relative importance of each of these objectives. These goals can be as basic as owning a house to live in or as fancy as a holiday in Europe or buying a luxurious convertible car. But, we need to find out the most important realistic goal among them which is not impossible to get. Goal, like buying a three bedroom apartment, might be realistic for one person and a distant dream for another.
So, we need to prioritise our goal, that is to put them in an order according to their importance.
When it comes to setting up of financial goals, one needs to resort to financial planning. According to Financial Planning Standards Board (FPSB) India, "Financial Planning is a common sense disciplined approach to managing your finances to reach life goals. It cannot change your situation overnight; it is a life long process. Remember that events beyond your control such as inflation or changes in the stock market or interest rates will affect your planning results." Financial planners across the world follow the same six step process of financial planning. Setting realistic goals is the most important step in this process. After understanding properly factors such as your needs, your income level, your net worth, your liquidity situation and your risk appetite, your planner will use a structured approach to come up with not only a list of realistic financial goals but also a roadmap to achieve the same. This will also include the timeframe to achieve each goal.
He will define each one of these goals in present as well as future money terms. For example, if you need to spend Rs 50 lakhs for your daughter's wedding in today's terms after about 15 years. After 15 years, assuming about 6 per cent inflation, the cost will be around Rs 1.2 crore. Now, if we are able to invest in a security yielding around 15 per cent for the next 10 years, we need to set aside about Rs 18,000 per month. There are various options like investing monthly, annually or in lump sum, through which you can save for your goal set by the financial planner according to your financial capabilities.
It is fashionable for the pseudo-modernists to claim that they don't set goals and don't plan for the future and take life as it comes everyday. They do realise, often when it is too late, that deepest pockets can also turn empty with time, if not taken care of. The first step for setting your financial goals, is to formulate goals that you can envision yourself achieving with your current job and income.
When you do set goals it is important to be realistic about those goals. Setting a goal that is obviously impossible to achieve is not only foolish, but will end up frustrating you to the point where you give up on your goals. Setting realistic goals may sound easy, at least to those of us who think logically, or at least feel that we do. But, there is a world of difference between the realistic and the impossible. It is the financial planners job to help you set realistic goals for yourself and also plan to achieve them under a stipulated code of ethics and clear guidelines of professional conduct. FPSB India advises people to realise hat they are in charge. If you're working with a financial planner, be sure you understand the financial planning process.
Provide the planner with all of the relevant information about financial status. Ask questions about the recommendations offered to you and play an active role in decion making. Being realistic is probably he biggest key to setting goals that you'll e able to achieve. If you can do this, you stand a good chance of getting through life with as few disappointments as possible.
