Exercise a plan, score the goal
“You must plan for your financial goals. You must do complete needs analysis,” so on and so forth. While these lines are sacrosanct, they are often used as punch lines by many advisors. Goal planning is a far more complex exercise than you can possibly imagine. It is the heart of a good financial plan.
Unlike the popular belief of asset allocation being key, it is actually a good goal planning structure gives control of cashflows and provides adequate bandwidth to fulfil most life goals.
Considering that one may have many goals, as an example, let us talk about three goals that need to planned. Down payment for a vehicle in two years, providing for interior decoration of your house in five years and planning for your child’s wedding in 12 years.
For a good goal plan, the amounts for these goals need to be defined now and a projection must be made. Such projection would be based on timeframe available for determining the future value of these goals by taking into consideration inflation pertinent to that goal in question. For example, if you propose that you child should study in Australia perhaps you would be better off looking at the Australian rate of inflation rather than the Indian rate of inflation.
The Workings
Now, as you can see, that the time frame for each goal is different and planning would depend on your existing assets, monthly cashflow available and the time that you have for achieving your goals. The time frame
