Set financial goals, and go for them

MUMBAI: Hope you are sticking to New Year resolution for a washboard ab. And sure it must be hurting very badly. Here is one more resolution a financial one, for a change which won't cause any pain. It is very simple: Have a plan. Confused? Well, according to financial advisors, absence of a "proper plan'' is the main reason why many individuals fail to achieve their financial goals.
"When most of our clients walk in for the first time, they are completely blank. They have made some investment in an ad hoc fashion, sometimes with the help of their bank, distributors of investment products or family friends,'' says Amar Pandit, a certified financial planner at My Financial Advisor, an investment advisory firm. "They may also have some bad experience of buying wrong products. They also mostly don't have any well defined financial goals,'' he adds.
"Most people go about their investments in mechanical manner. They may have some ideas in mind like they want to fund their child's education or buy a house in, say, two year,'' says a mutual fund manager. "But they believe that their regular investments like employees' provident fund or bank fixed deposits will take care of their needs. This need not be the case,'' he adds.
According to financial experts, the first thing you have to do is to identify a financial goal in life. For example, say, your child's higher education or your retirement plan. "There are some goals in life which are certain. For example, you would retire one day. Whether you want to do that at 50 or 55 is your choice. You would be able to achieve it only if you have clearly defined the goal in the first place,'' says Pandit. "Once you have a goal, you should also try to quantify it. For example, take stock of your situation and find out how much more money you need to achieve that goal,'' he says.
Once you know how much time you have and how much money you need to make, say financial advisors, you have to create a financial strategy and choose investment vehicles to achieve it. For example, if you are investing for your child's higher education which is 15 years away, you can take the route of the stock market to create the corpus. However, if you have only a few years to achieve a specific goal, you shouldn't take the equity route. You are better off sticking to the debt.
Finally, review your investment plan periodically to ensure it is working fine. "You should review your investment plan every six months or as and when there is a change in the internal or external environment. This will help you take corrective measures,'' says Pandit.
Five things you should do:
1) Identify a financial goal in life
2) Find out how much money you need to achieve the goal
3) Take stock of your situation and find out the gap
4) Create a financial strategy to meet the goal
5) Do a periodic review at least every six months.