Two Cents | Realistic goals make all the difference between success and failure

Do you know why people sometimes fail to achieve their goals? There are usually two reasons behind it. One, they didn’t plan their goals properly or, two, they set unrealistic goals.

Let’s say you want to take an exotic international holiday in three years’ time. The first thing you need to know is how much it’s going to cost you. If the amount is, say, 5 lakh rupees, then you must start saving for it from the moment you first set it as a goal. You cannot wait until the last month or even the last year to start your financial planning for the goal.

If you start saving beginning of the first year, then you need to set aside only 15000 rupees a month. But if you chose to wait until 12 months before your travel, then you will need to save a whopping 42,000 rupees a month. Obviously, it is easier to save 15,000 rupees than 42,000 rupees a month.

To stay motivated with your financial planning, it’s often important to achieve quick wins. For example, if your dream is to create a rainy-day fund fairly quickly, then don’t set a large target. Make one lakh rupees your emergency fund target rather than 5 lakh rupees.

Once you achieve the one lakh target, you will find that you are motivated enough to go for a bigger target. Otherwise, you will feel dejected and run the risk of going off financial planning altogether. Establishing realistic financial goals involves a few basic steps.

Step One is to identify the goals that matter the most to you. Many of us would love to own a luxury car. But if that is going to come in the way of you buying, say, a home, then it’s best to give it a low priority. Therefore, prioritise your goals.

Step Two requires you to assess your current financial condition. Take stock of your assets and liabilities; in other words, what you own and what you owe. This important exercise will tell you exactly how much you can invest every month.

Step Three is to set time-frame for achieving each of your life’s goals. Be realistic when you set targets. For example, you cannot hope to create a nest egg of 1 crore rupees in one or two years. For most Indians, the timeframe has to be 15 to 20 years.

Step Four involves identifying a long-term investment plan that is aligned to your goals. After all, your investments need to generate returns that will exceed the rate of inflation and, therefore, ensure net wealth creation.

Step Five involves you regularly reviewing your investment plan performance so that timely modifications can be carried out. This will ensure that your investments are optimally aligned to your life’s most important goals.

So, remember: prioritise your goals and plan appropriate investments to achieve them.

(The writer is Managing Editor of TV9 Kannada, and formerly Managing Editor of ET Now and Business Today)