What Are Your Goals?

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Series: Beginning Investing (5th post)
Section: Setting Your Goals
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OK, so now you know how much you're worth, the amount you spend and the amount of money you can put away every month to meet your goals.

The question for this post is - what are your goals? And remember, these are goals you are defining, not dreams or visions like 'I want to retire rich on a little island in Spain'. They need to be tangible and down-to-earth.

There are three things you need to define for each of your financial goals: what you need money for, when you need it and how much you need. An example of a goal would be 'I need Rs. 5 lakhs to pay for my son's wedding 5 years from now'. Since it is tough to predict how much prices will rise over a long period of time, it would be easier if you just work out the funds you would need to fulfil the requirement in today's prices. You can work out the inflation-adjusted requirement later.

Sit down with your family and work your goals out in some level of detail. After you have these settled, re-order them in a chronological format, with the nearest goal first and moving down to the goals that are furthest out.

When planning your goals, do ensure you consider the following:

• Childrens' education: Lumpsum amount to pay for a good college / post-graduate education for your kids
• Weddings: Lumpsum amount to pay for your childrens' wedding(s)
• Home purchase: Lumpsum amount to pay for an outright purchase or down payment on your own home plus furnishings etc.
• Financial freedom: A point in time at which your average monthly spend should be accounted for purely out of passive income i.e. income from your investments. For more information on this, please read my earlier post on this subject
• Retirement: How much money you need to retire so that your retirement egg will sustain you for the rest of your days

This first draft of your goals might change a bit based on how much you can realistically invest and on the level of risk you are willing to take, but that is the subject of the next post. Also, do note that these goals will probably change from time to time, depending on your stage in life e.g. you might start planning for your childrens' education once you start a family, a requirement that may not have been in your plans earlier.

But, for now, give yourself a pat on the back for getting here. You now have the entire foundation laid for building your financial plan, not a mean achievement at all!

Till next time, happy investing!

Next Post on Beginning Investing: How Could You Achieve Your Goals?