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I love lists. From the time I was a student, I have found that making a list helps me every time I start to feel even a little bit overwhelmed. When the load of the curriculum got too heavy, a list would help me organise my time and study pattern.

If things in the office started going every which way, a list put me back on track. While shopping, a list stopped me from impulse buying. Now when it comes to planning my finances too, I find a list most useful in letting me set my goals and more importantly, achieving them.

My secret to successful financial planning is making a list of my money goals. Breaking down my long-term objectives into small-term goals prevents me from getting overwhelmed by the numbers and makes the long-term goals achievable.

Research has proven that setting financial goals is the most effective way of investing and achieving them.

What is financial goal-setting

This is nothing more than a list of things you want in life, with a bit more direction. So get that note-pad and eraser-tipped pencil (goals will keep changing) and start making your list. Include everything you dream of – big and small.

  • house
  • car
  • foreign vacation
  • paying off any loans
  • retirement fund
  • emergency fund
  • sending your parents on a holiday
  • school fees in a swanky international school/ college for your kids
  • going for higher education/ skill enhancement to a foreign university
  • getting a makeover for your cousin’s wedding
  • getting an expensive gym membership with a personal trainer
  • overhauling your entire wardrobe
  • taking a year off to backpack across the world
  • opening your own boutique
  • setting up your pottery studio
  • recording your song in a proper sound studio

Prune it

The next step is to sort through the list. Weed out the really unrealistic goals. Your list can have anything your heart desires. But it needs a bit more work to become your financial goals. A financial goal essentially needs three elements – a thing or service that you are investing for, the cost of the said thing and the time frame in which you would want to reach or acquire that goal. As always, refine your list of wishes and prioritize which are the ones you want to build as financial goals.

Sort the rest according to a time-frame into long-term and short-term goals. From this long list, make a shortlist. For example, a car is a short-term goal while your retirement fund is a long-term goal. It is important to have small, easily achievable goals in your list as there is immense psychological satisfaction in ticking things off a list; along with the long-term goals to keep you focused.

Now do the math

Sit with a calculator and figure out how much money will make your dreams come true. Remember, the numbers may daunt you, but as you keep getting closer to your goal, it will make it all worthwhile. And because the numbers are only going to get higher the longer you wait – factoring in inflation – the sooner you start the better.

Find the right investment tools

With a real-time financial goal in sight, it becomes easier to find the right investment tools to achieve it. If you are looking to spend some big money at your best friend’s destination wedding next year, you can invest your money in X fund. For your travel fund which you will need 5 or 6 years hence, you can plan this very sensibly.

Let’s assume you want to take a trip in January 2022 which would cost you ₹ 3,00,000 in today’s value. If I consider inflation of 10% (yes, that is how expensive travel gets) the same goal will cost me ₹ 3,68,000 in January 2022 and I need to plan for that amount. When I break it down wanting to save in a combination of safe mutual funds, I need to start a SIP of ₹ 13,000 every month to get to that amount.

On the Basis app, we’ve made it really simple for you to save for a goal. Just download the app, answer a few questions and you can start investing right away. For instance, if you need to save up ₹ 2,00,000 for an emergency fund in the next one year, we will recommend how much you need to save every month and which mutual funds you should invest it into, so as to maximise your chances of hitting that number of ₹ 2,00,000.

The investing advice comes to you on the basis of your inputs – like the amount you want to invest, the amount you eventually want, your risk appetite and your time-frame – via an algorithm. The advice is unbiased because Basis is a SEBI RIA(Registered Investment Adviser) and we do not receive any kickback from companies for recommendations.

Why is a financial goal important

The most important function of bucketing your funds or investing for specific goals as opposed to investing in a single corpus is that it keeps you from spending on other stuff. My husband and I very consciously set up separate funds for our different goals.

We have some common goals and some personal goals and we keep investing in them according to a plan. We factor in all our earnings – even my husband’s substantial bonus – into different heads. It could be investing to build a corpus for a down-payment on a home three years down the line, a vacation next year or for our retirement.

The one thing we are very conscious about is that we would never take money out from our house down-payment fund for something else. Having said that, it is also important to remain flexible. For example, if you have a substantial retirement fund but you want to go to a business school abroad, you can withdraw money from it rather than take a student loan. As a general thumb rule, pick your goal and do not waiver from it or use the funds of one goal for another.

An app that is focused to help women live life on their terms, Download to start investing on Basis now.

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