Get Set For Your Target :

All of us make plans with regard to financial matters, be it taxes or cash flow. In reality, financial planning is much more. It may be defined as the process of meeting life’s goals through proper management of finances.

Financial Planning And Goal-Setting

Identifying and setting of goals mark the beginning of any financial plan. The goals can include buying a home, saving for children’s education, or planning for retirement. Once you have a financial plan in place, you can take decisions in terms of your short- and long-term goals. It allows you to adapt more easily to changes and you feel secure that you are on track.

Benefits Of Setting Goals

Setting goals during the planning process will help you curb short-term temptations in favour of your more important long-term goals. Financial planning ensures discipline, improves your financial decision-making and, over time, helps you develop an asset allocation strategy in accordance with your risk tolerance. Goal-setting helps in safeguarding you and your family against financial crises in the event of death or disability when your dependants need your financial support the most. Planning for retirement or children’s education becomes easier. Most importantly, tracking investments with respect to your goals becomes easy.

Process Of Goal-Setting

The world over, financial planners use a six-step process to determine a person’s financial standing. The process largely involves gathering relevant information, setting goals, examining current financial status and coming up with a strategy or plan for meeting the goals. 

Fixing The Tenure

After you have a basic idea of your financial goals, put them down on paper. Classify the goals into short-, medium- and long-term ones, depending on how far they are (within a year, five years, and more than five years away, respectively). A vacation and buying a home theatre may figure in the list of short-term goals, while acquiring a house and a bigger car in the list of medium-term goals. Child-ren’s higher education, providing for dependent parents, and retirement may figure in the list of long-term goals.

Identifying goals

This is important, as otherwise, it will be difficult for you to effectively manage your resources. So, chart out your financial roadmap only when you have put your financial milestones in place.

Your list of financial goals includes items that are important to you, and if you plan your finances well, you should be able to reach these milestones successfully and on time. Keep your family’s goals in mind even as you identify your personal financial goals.

Challenges in goal-setting

It’s better to be aware of any impending financial challenges so that you are able to take control of the situation in advance. Generally, an individual avoids doing structured planning due to the tendency to procrastinate. Some of the most common excuses are: “I don’t have time”, “It’s too hard”, “I’ll worry about it later”, and “I have other things”, among others. Another challenge is to avoid the tendency to live beyond one’s means. Sacrificing instant wants to achieve future needs is tough when done without guidance.

But the most crucial of all challenges is the lack of financial knowledge. Most individuals don’t know how to draft financial objectives and evaluate the available strategies. They make mistakes such as delaying the accumulation period, setting unrealistic goals, and looking for quick-fix financial solutions over long-term strategies.

Many a times, most of us start expecting unrealistic returns on our investments while ignoring the basics. 
A large number of people do not give enough importance to insurance, which helps take care of the unforeseen events affecting finances. Other challenges could be confusing investing with financial planning, investing only for saving taxes and not conducting periodical reviews of your financial situation.

If you can overcome them, you can do your own financial planning. The above concerns are not to discourage you, but to give you a sense of what may come in your way to achieving financial freedom.

~

Source :outlook