Goal setting is an integral part of building up wealth and setting finances in the right direction. Likewise in your profession or any important task you do, setting goals brings clarity and measurability to the task. Once you have your goals set, you can right away jump into action to work towards bringing them to reality. Irrespective of what we are aiming towards, especially in finances, goal setting is crucial.
Here are 6 reasons which explain why goal setting is highly important to your financial health;
- You must have some aim
Let us say you have saved some money, invested it, are gradually increasing the investment amount as well but are you aware of why are you doing so? What is it that you want to achieve? How are you going to measure if you have succeeded or are left behind? What will be your success count?
All these questions can only be answered if you have an aim or goal in mind towards which you are investing. For example, if you wish to buy an SUV of the range 18 lakhs to 20 lakhs then you have a clear goal in mind. If you have invested for 5 years and by the time of maturity you have managed to gather a corpus worth Rs. 20 lakhs, then it’s a success and if not, you will know how much you are lacking to reach that number.
Knowing end goal is highly beneficial as it will help you in selecting the right path considering all other influencing factors.
- It will bring clarity
Having a financial goal in mind will always help you map what is your current situation and where you need to be. It will always work as a guiding force towards your ultimate destination in the financial journey.
Setting financial goals will let you know how much more you need to save and invest in order to be able to realize your goals. In simpler terms, you are quantifying your goals into measurable numbers. Rather than saying I want a luxury car; it is better that you clearly know and say you want a luxury car worth Rs. 30 lakhs. It will help you understand how long it will take to reach this number and also will let you measure your status quo at regular intervals.
- Help you adapt to changes
Life is uncertain hence you need to be prepared at all times. Setting goals will enable you to work towards your goals in a systematic manner and let you preserve your wealth. With time as your life changes, so will your goals. Depending on your family needs and other obligations you need to fulfill, your desire to buy a luxury car may move to buy a sedan car to accommodate the family.
Since you already were working towards the goal of buying a car, you will be able to adapt to this sudden change in goals and redirect your energies and finances accordingly.
- Helps in strategizing
Strategizing is a very aspect of achieving your financial goals. Even if you have set your goals and have an ample amount of money to invest, adopting the wrong strategy may prove very harmful to the financial health of your portfolio.
Setting goals brings about clarity and hence helps you in appropriate fund selection which in turns defines the strategy you are going to adopt with your portfolio. A healthy portfolio is a combination of defined goals, appropriate funds, diversification, and apt strategy.
- Helps you stay focused
Setting goals is a mental benefactor as well. It helps you stay focused towards your ultimate aim and prevents you from getting distracted towards any destructive ideas. You will always be focused on achieving the set number and not let your thoughts waiver.
A focused mind never takes a decision based on impulses which are short-lived but highly damaging. If you have some loose ends with your finances, you will be extremely prone to instant splurges and impulses.
- Helps you chose better
When you enter the stock market and world of investments, you are exposed to hundreds of options which can be highly confusing. As a beginner, you would not want to commit mistakes which will take a lifetime to be rectified. Even if you are a seasoned investor, you must have a goal in mind before you invest your money.
Having goals set is highly beneficial in choosing the right instrument type to invest in. depending on your goals which may be both long-term and short-term, the investment vehicle may be chosen.