Why do you need to set goals?

What is goal setting?Everyone has dreams and ambitions. For example, a student may want to stand first in class. An athlete wants to win the gold medal in a track and field event and so on. But when it comes to finance, everyone has a similar dream. People want enough money so that they can meet their needs and desires. However, having a dream is not enough. You need to convert these dreams into reality. And for that, goals are necessary. To borrow a line from author Napoleon Hill, “A goal is dream with a deadline.” The goals of financial management are critical in ensuring a seamless investment process for a better tomorrow.So, let’s find out why goals are very important when it comes to financial planning.Goals in financial managementWhat is goal setting? Stocks, mutual funds, bonds, pension plans and fixed deposits are some of the common investment avenues where people invest their money and can be regarded as goals. But instead of simply investing to earn higher returns in the future, it is always better to invest with a purpose, thus emphasising the importance of goal setting in our lives. Why is goal setting important? Let’s take Gaurav’s case as an example. An accountant by profession, he has a wife and two young kids. He wants to start investing because his financial responsibilities are going to increase in the future. The illustration below lists a few of his future responsibilities and financial goals he wants to achieve in the next few years.

Clearly, Mr Gaurav has different obligations. But on a closer look, it is possible to segregate them into three different categories:

Importance of goal setting Segregating your financial requirements into short-, medium- and long-term goals can be very helpful. This way, you can create a good plan to achieve these goals at the right time in life. In addition, it also helps you identify which investment options can help you achieve your goals as fast as possible. ConclusionTaking that first step to invest money is very important. But it is more important to invest towards specific goals. This way, you can channel your funds in the right manner and utilise the benefits of goal setting through a sound financial plan, thus realising your dreams in a timely manner.