Every one of us have our own financial dreams. It could be anything: From being completely free from debt to retiring early, to building one’s own home, to setting up a business, etc. It is good to have dreams but the challenging part is transforming those financial dreams into financial goals. Converting such an enormous dream into reality within a certain timeframe is hard but doable. Irrespective of your specific financial goal, following are the five simple steps you can take which will definitely increase your chances of success.
Create a detailed plan
The plan must be chalked out by you only. Ask yourself certain basic questions such as what your specific financial goal is, what is the timeframe, intermittent milestones such as monthly or yearly goals, etc. You are the best judge and your plan for achieving your specific financial goal, should involve clear-cut answers to all these questions. At the same time, the plan should have certain in-built flexibility as you never know what the future will hold for you. Also, in goal-based financial planning one should periodically review the plan.
Be realistic while chalking out plan
While making a plan do not be too ambitious. Be realistic, especially on the flexibility part. How do you bring flexibility into your plan? Well, the best thing you can do is make sure your plan is based on reality. Often, people establish savings goals that are simply outside the realm of what can easily be achieved. For instance, a person who leads his/her life from pay-check to pay-check is not going to be debt-free overnight. Instead, look at what you can realistically save. If you are setting a goal for debt freedom in five years, can you realistically come up with 1/60th of that amount every month? If your goal is not realistic in the short run, it would not be realistic in the long-term too.
Once you have your financial goal broken down into small achievable milestones, automate the entire plan. For instance, give a standing instructing to your bankers to transfer automatically a fixed amount to a separate account either on weekly or monthly basis. This will help you in two ways. First, it locks you into a plan that moves you toward your financial goal without having to make active decisions along the way. Second, it puts you in a position where you focus on dealing with how to lead life after making a provision for your goal—not trying to decide whether to make for it.
Keep the funds out of reach
Once when you commence the savings activity, it could be tempting to use that money for some other purposes. But there should be no way for you to access that money because impulsive decisions will prolong your financial goal. Instead of opening a separate savings account in the same bank where your main account is being operational, save your money in a different bank located remotely or even keep an account in other financial institutions such as a post office.
To conclude, follow the above steps which will help you to achieve your financial dream into a financial goal.
(The writer is professor & Dean, School of Commerce and Management, Central University of Tamil Nadu, Thiruvarur)