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How to set financial goals?

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Understand your priorities and start with a short-term target Once you have clearly defined your goal, break it down into small specific tasks and start tackling them, one at a time

MOST people fail to achieve financial independence simply because they don't have clear financial goals.


Having a clearly articulated goal is what separates achievers from seekers.


Simply `saving more money' is not a real goal.

SMART is a five-letter acronym used by life coaches everywhere, which stands for specific, measurable, achievable, realistic, time bound. The old saying is that behind every successful man there is a very smart woman.


These days, it is safe to say that behind every successful man there is a coach. Having an executive coach is very a la mode in the states, though most successful people will not readily disclose that they work with one. Tiger Woods, Barrack Omaba and Richard Branson are just a few of the famous people who have hired one.

A goal has to fulfil the following criteria, all at once. It must be:

Specific:

"Save Rs 6,00,000 over five years to finance my daughter's college education," is a specific goal.


Many people have read the book The Secret by Rhonda Byrne. It explains that more you focus on a thought, the more likely it is for the mysterious forces of the universe to give in to you. If you are not a mystic, there is a scientific explanation for this effect -you will simply be more focused if you have a specific goal to pursue and you will channel all your mental and physical abilities in the right direction.

Measurable:

Put numbers on your goal -numbers in terms of money, time and outcome. How much, for how long, towards what result? These are the questions you need to answer.

Achievable:

Of course, you should dream big, but not too big. If you set yourself a goal that even you can hardly believe in, what is the point of it? You will eventually just give up. First you must decide -is this an attainable goal? At the same time, don't go too safe, because if it is too easy, you will simply get too bored to pursue your goal.

Realistic:

While the `achievable' quality of a goal is a personal one (because only you can decide if the goal is achievable for you, it is something that comes from your gut feeling), a realistic goal is one that takes into account the objective circumstances of the world around us. For example, switching jobs in a recession for a different role, industry and a higher salary, may not be very realistic.

Time ­bound:

You need to give yourself deadlines and stick with them. This will keep you focused and will help you track your progress towards achieving the desired goal.

A SMART goal would be "I will save and wisely invest Rs 5,000 every month from my salary for six years to fund my daughter's education. With interest, this will amount to a minimum of Rs 5,00,000 by August 2019, which will be sufficient to pay for her expenses for the duration of the four-year course."

Once you have clearly defined your goal, break it down into small specific tasks and start tackling them, one at a time.

To make your goal SMARTER, add two more parameters: Exciting: A goal has to make you excited, because you are not likely to stick with it, in particular in the long term, if it doesn't. It can be difficult to get excited by boring financial matters, but you could become very excited by the non-financial outcome of it if you try to picture it. Just imagine the sheer look of happiness on your daughter's face, once she gets to know that after she worked very hard for many years to get into the college of her dreams, she has now been accepted and you have the means to support her.

Relevant:

Assess how this goal fits into your bigger picture, into your major life plans.

Probably the most important things to remember when you set your goals is that they have to be your own, based on what you think is best for you and your family, not on what others think. Consider what your priorities are at this stage and start with a short-term goal that can be fulfilled within three to 12 months. The sense of achievement when you attain it will most likely motivate you to tackle a bigger challenge next.

Happy Investing!!

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