Goal setting is a crucial part of budgeting and personal finance. It not only eases the investment but also makes it easy to track the financial progress. The goals can be viewed as financial needs which then can be accomplished under defined investment instruments. While setting goals, investors tend to commit some common mistakes which should be avoided at all costs. Here are some goal setting mistakes you must avoid;
- Setting unrealistic goals
The first and foremost thing to consider is to set goals which are SMART. Realistic and attainable goals are the only right way of goal-setting. Investors in aspiration of making huge profits and creating wealth, tend to set goals which are unachievable and unrealistic. The biggest drawback of setting too high goals is that it becomes almost impossible to monetize them. for example, a common goal people set is to become rich soon. This is a very uncertain and undefined goal. Becoming rich needs to be specific in terms of net worth that you consider as rich and also the time frame within which you wish to do so. The goal should ideally have been creating wealth worth Rs. 10 crores in the next 15 years.
Being ambitious is good but being over-ambitious kills the essence of it. Be practical and pragmatic while setting your life goals- financial or personal or professional.
- Setting and forgetting
Goal setting is very important but is an incomplete act. Goal setting is half work only, the next few steps should point towards achieving that goal. If you do not work towards achieving those goals, there is no use of putting an effort into setting them. Once you have set your goals, make sure you have a plan to achieve them.
- Setting unaligned and unprioritized goals
Now that you have made a plan and are all geared up to work towards achieving them, one thing is important to be checked- alignment of the goals with the type of investment vehicle you are going for. For example, you may be up for investment in a long-term liquid fund or a short-term equity fund none of which is a recommended combination. If you are finding it difficult to select and align the right instrument as per your goals, take expert advice. Try piggy premier .
Another important thing to consider is to set goals in a priority. It is crucial to save for your child’s education first before a foreign vacation or for your emergency funds before a car.
- Not considering inflation
Another most common mistake committed by investors is not taking inflation in the account. Inflation is a strongly affecting factor which alters your maturity amount to a great extent. Inflation changes the value for money from time to time, whenever there is a change in the economy. Adding inflation helps investors in dealing with rising expenses and saving as per economy movement.
- Not tracking the set goals
Another inexcusable mistake investor commit is not tracking the progress of their goals. Making profits and creating wealth is not a day’s game, you need to stick to it till the time you hold your investments. After you have set your goals and taken care of all the above points, the work does not end here. You need to track the progress of each and every goal and investment. The frequency of this tracking may vary with a diversified portfolio.
Depending upon your family needs, you can always change your goals but remember the ultimate goal is to create wealth for sustained living. If you wish to achieve your goals faster, invest in mutual funds with a SIP. SIP is a systematic investment plan which comes with an additional benefit of SIP step-up. This feature allows you to increase the amount of the investment at a fixed rate per year. Say if you invest Rs. 10,000 monthlies in 2019, then in 2020, you can go for a 5-10% increase in the SIP amount. Taking 10% as step-up, your 2020 SIP monthly will become Rs. 11,000, in 2021 Rs. 12,100 and so on. This will help you realize your goals faster and in a more efficient way. Read more about SIP and calculate your step-up maturity value with our step-up calculator.
Setting goals which can be achieved and monetized are always the better ones. Setting goals is just the first step in achieving the desired wealth, keeping them in alignment and tracking the set goals regularly is also crucial to ascertain the ultimate goal.