All of us work very hard in our life to be successful. But very few of us taste the fruit of success. If we carefully analyze the working of the successful people, we will find that they work differently. They work systematically and with focused attention to achieve the life goal. To achieve this, they plan meticulously. It’s called Goal Planning. Proper Goal Planning helps us in working smarter; of course, we have to work hard also. Smart working helps in optimizing the desired results.
VISION VS GOAL PLANNING
Sometimes people confuse vision with Goal Planning. They think that both are the same, but not so. Having the vision is the first step of Goal Planning. Vision gives you a destination, whereas goal Planning helps in reaching the Destination.
SETTING OF GOAL
The first step of a Goal Planning is setting up of a Goal. The word SMART helps in setting up of any goal. It is an acronym of Specific, Measurable, Attainable, Relevant, and Time-bound.
1. Specific- The Goal set must be specific as to what is that you want to achieve. It should be clearly defined.
Measurable-Goal must be measurable, so that you can check periodically to ascertain the level of achievement.
2. Attainable-Goal fixed must be attainable. We should not set the goal that is beyond our capacity, in terms of finance and physical capacities.
3. Relevant- Goal fixed must be relevant to what we want to achieve.
4. Time-Bound- It is the most vital part of the Goal Planning. There must be a fixed time limit for achieving the goal. You can not continue your efforts to achieve your goal for an indefinite period.
EXECUTION OF GOAL PLAN
The success of the Goal Planning lies in the proper execution of Goal Plan. The following are the steps of the execution of Goal Plan:
1. Focused Attention- You should have focused attention on your Goal. There should not be any distraction or deviation.
2. Attitude- You should have the right kind of attitude towards the goal. If anything is holding you back, then you have to avoid it immediately. Have a positive attitude always.
3. Stay on course- Once goal decided, stick to it. Continue your efforts to achieve the same.
4. Monitoring- Periodical monitoring of progress helps in measuring the level of achievement of a goal. Approach to be changed if needed.
5. Adjustment: Be open to adjust the Goal as the situation warrants.
AREAS FOR GOAL PLANNING
The following are the key areas where proper goal planning can help in achieving the desired aim. We can classify goals into Long Term and short term goals.
LONG TERM GOAL:
Long Term goal requires punctilious planning and takes 10 to 15 years.
1. EDUCATION- What level of education you want to achieve, the field, level of skill, etc.
2. CAREER- What do you want to become in your life, a Bureaucrat, Engineer, doctor, or a successful businessman. It is to be clearly defined.
3. FINANCIAL- How much do you want to earn. It is an essential planning as it is interrelated with other goals of life.
4. FAMILY- As to when you want to start your family. What type of life you envisage for family members. What are your plans to help your parents, wife, and children?
5. RETIREMENT PLANNING- Goal must set for creating a corpus to have at the time of retirement.
EXAMPLES OF LONG TERM GOAL:
To complete my Post graduation by the age of 21-23 years.
To start my career by the age of 25 years.
To get married by the age of 28-30 years.
To built house by the age of 50 years.
To do retirement planning after the age of 50 years.
SHORT TERM GOALS:
Short Term Goals are for a shorter period. It may range from six months to 3 years.
1. Amenities- Like purchasing a car, other household gadgets, Home theater, etc.
Pleasure- Planning vacation abroad along with family.
2. Acquiring new skills- Acquiring new skills to achieve better career growth, better financial returns.
3. Physical- To improve fitness, reducing weight, quitting smoking and chewing tobacco, etc.
4. Social Service- Fulfilling the social responsibilities by contributing to philanthropic activities.
EXAMPLES OF SHORT TERM GOALS:
1. Want to purchase a car in the next three years.
2. Goal to take the family for a vacation abroad in the next five years.
3. Ambition to acquire a new skill to improve for a better career in one year.
4. Want to reduce 10 kg weight in the next six months.
5. Want to take a family of outing at the weekend.
GOAL SETTING IN FINANCIAL PLANNING
Goal Planning is equally significant in Financial Planning. Finance plays a vital role in our life. We need money at every stage of our life, be it Education, Treatment, Marriage, Higher education, Purchasing house, Retirement, etc. Meticulous planning may ease our burden.
TYPES OF FINANCIAL PLANNING
The following are the significant areas of financial planning:
1. Generation of Funds:- It is the first and foremost requirement of financial planning. Funds are the basic requirement for the Financial Planning. Most funds come from the savings. Areas, where you can save an amount, are to be identified.
2. Investment Planning: It is the second important part of financial planning as the creation of wealth over a while depends upon prudent investment. You have to invest the amount according to the period that means Short, Medium and Long term.
3. Tax Planning- By proper tax planning, You can legally save the amount that will add to investable funds in your hand.
Insurance Planning-Life in uncertain. Family should not face any financial problem after your untimely demise. Hence it is essential to obtain an adequate amount of insurance. You should have sufficient funds in your hand to pay insurance installments.
4. Retirement Planning– The working or earning life of a person is limited to certain years. Normally, a person retires after attaining the age of 60 years. To lead the same standard of living, one needs sufficient funds in his hand at the time of his retirement.
Besides above we need funds for Marriage, Higher education of children, medical treatment, the Purchase of houses, etc. for all the above expenditures we must have funds in our hands. You can achieve this through proper financial planning only.
STEPS IN FINANCIAL PLANNING
1. Income- First income is to be determined. What is the level of income? How much disposable income is available in hand.
2. Savings- Through savings, only the corpus gets created. As per conventional wisdom, you should save 20% of the total income.
3. Financial Goal- You have to set the Financial Goal as per the need. You may require Funds for various purposes like Marriage, Higher education, Retirement, etc. Accordingly, you can invest funds for Short, Medium and Long Term.
4. Investment Strategies- Proper investment strategies are to be adopted for profitable deployment of funds. Funds may be deployed in different investment schemes viz; Bank FDs, Mutual Funds, Bonds, etc.
5. Monitoring-Investment made in various schemes are to be monitored continuously as to whether the returns are in line with the expectations. If not, then the investment is to be re-jigged.
6. Risk Management-Every investment has inherent risk. Hence adequate steps to be taken for mitigating the risk and avoid any possible loss.
BENEFITS OF FINANCIAL PLANNING
The following are the key benefits of the proper financial planning:
1. It helps in managing your funds in a better way and offers better returns.
2. It helps in determining your need for funds for various purposes like Marriages, Higher education, Medical treatment, Retirement, etc. It helps in fixing the goal accordingly.
3. It helps in preparing a suitable investment strategies for optimum return on your funds.
4. It helps in the creation of wealth over some time due to the compounding effect on returns.
5. It helps in monitoring of investment and change the same as per the requirement.
6. It inculcate the habit of thrift and savings, which helps in providing funds for investment.
7. Tax planning helps in savings on tax legally.
DISADVANTAGES OF FINANCIAL PLANNING
Like another thing the financial planning has some disadvantages also. The following are the main disadvantages:
1. In financial planning, investments get made for the long term. We have to keep patience. In case of emergency, if we withdraw prematurely, it may cause a significant loss. Even there may be a loss in Capital also.
2. The return on investment is not assured. We invest based on the past performance of the scheme. It is not sure that past performance will continue in the future also.
3. The return on investment depends upon various factors like Government policies, Economic conditions, International factors etc.
4. It is clear from our discussion that Goal Planning plays a vital role in our lives and helps us in achieving various landmarks in our life.
