Why Setting Financial Goals Matters
Discussing your Financial Goals with your Financial Advisor can be the single-most powerful money-move you can make. As simple as linking your investments to your future objectives might sound, it’s a step that can actually have a profound impact on your family’s financial future in the long run. Here are a few ways in which Goal Based Financial Planning can add value to your Financial life.
Makes You Bother a Lot Less About Markets
Goal Based savers tend to be less bothered about day to day fluctuations of the stock markets, since they have their eye on the big prize. Resultantly, their investments will be more likely to stay the course and recover after bearish phases, whereas other investors will have mindlessly churned their funds in their fruitless attempts to “time the markets”. If your goal based savings flow into volatile assets in a systematic manner (for instance, through Mutual Fund SIP’s), you’ll end up benefiting from the ups and downs in the long run.
Focuses Your Priorities
Goal Based Financial Planning focuses your priorities and ensures that your cashflows are directed to the areas of your life that really matter. You may be all set to redeem a large chunk of your investments for the down payment of a new lifestyle purchase, only to be informed by your Financial Advisor that this move would have a 50% impact on the achievement of your Child’s education planning goal. This would no doubt make you pause and reconsider your decision – which, in the long term, will stand you in good stead.
Makes You a Long-Term Investor
It’s a well-known fact that “time in the market” beats “timing the market” hands down, in the long run – and being a goal-based investor encourages this behavior. Picture this typical scenario – if your goal is to save Rs. 50 lakhs for your kid’s higher studies in 15 years, and your current 5 lakh corpus dips 10% to 4.5 lakhs, would it bother you too much? Not really – because your goal post is likely still 12 years out, and you know that you have enough time to catch up. By vastly increasing your ‘stick-to-itiveness’, Goal Based Financial Planning indirectly makes you an much more evolved and a superior investor.
Guilt Free Spending
Strangely enough, Goal-Based savers feel less guilt while spending money on themselves, compared to their ad-hoc investor counterparts. Why so? It’s simple. When you know that you’ve got a “work in progress” financial plan that’s steadily moving you ahead towards the attainment of your important financial goals, you can actually spend some of your money happily. And that’s a great feeling!
Decreases Your Leverage
It’s not surprising that Goal Based Savers are relatively less likely to display an interest in the Facebook-fueled race to outdo their friend’s latest lifestyle purchase. Instead, they tend to be more responsible spenders who don’t end up taking loans and partaking in the never-ending race of borrowing followed by repaying. Eventually, they end up wealthier and happier than their counterparts.