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How to make your money goals attainable

What you need to watch out for is not getting carried away by your emotions and instead, setting goals which you can achieve realistically.

The first step for long term investing to be most efficient is to have defined goals that you seek to achieve through these investments. Goals should be defined in terms of the event and the future value required to achieve it. Often life dreams and goals overlap making financial planning and goal setting an emotional activity. 

What you need to watch out for is not getting carried away by your emotions and instead, setting goals which you can achieve realistically. 

The risk of unattainable goals

Let’s say your brother sent his daughter to an American University for higher education at a tuition cost of Rs 1 crore for three years. It worked out well for her and now you aspire to have the same outcome for your daughter who will be eligible to start college in five years. Your child’s higher education goal is thus valued at Rs 1 crore plus additional expenses of travel, living and so on with a time frame of five years. You are told he saved and invested in equity funds to be able to achieve this outcome. 

Instead of increasing risk or compromising on your retirement pool, you will have to lower the value of your goal, make it more realistic and attainable. 

You too, get ready to make the same investment. To get to Rs 1 crore in five years, you will have to invest at least Rs 1,20,000 each month in equity assets with an assumed annual return of 12%. However, equity markets are volatile and if there is a correction closer to your goal maturity your entire investment for this purpose will be at risk. 

You are told to shift funds to debt investments two years before you need them. However, if you do that and still want to achieve the same corpus of Rs 1 crore, you will have to invest Rs 2 lakh a month for three years in equity assets. 

Firstly, this may be unaffordable at your income level and you have to question what you are giving up – retirement pool or present lifestyle – to achieve that. Secondly, by increasing the short to medium term investment in equity assets you are increasing your investment risk manifold. Equity as an asset delivers expected returns with a higher probability when money is invested for a long period. Three years is not that long. 

Instead of increasing risk or compromising on your retirement pool, you will have to lower the value of your goal, make it more realistic and attainable. 

Setting attainable goals

While planning your future financial goals, it's important to keep these factors in mind.

1. Set the value(s) of your financial goals keeping in mind your income inflow and understanding of risk rather than relying on what others are doing. 

2. The earlier you start planning for a long-term financial goal, the more room you have to grow your wealth with a higher probability of achieving the desired value. Moreover, you can start with lower monthly investment amounts, thus lowering the pressure on your immediate cashflows. 

3. Keep it regular, don’t take breaks. The key to achieving the value you set for your long-term financial goal is to not step off the path until you get there. Breaking or pausing investments beforehand is a sure way to ensuring you don’t achieve your goal.

Financial goals may look like numbers on an excel sheet, but when you achieve them you are fulfilling a life goal. Getting there requires you to be aware and active in implementing your financial decisions. 

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