More money is better than less money – for most people. But what you do with the money equally matters. That's where financial goals come into the picture. In the last few weeks, I've written about Debt-Free, Financial Freedom, and Financial Reality, so now is probably a good time to discuss all things related to Financial Goals.

This newsletter focuses solely on Financial Goals. I am not writing about how to achieve the financial goals because that would include investing, increasing income, savings, expenses, etc. However, I promise to cover "How to Get There" next week.

Setting Financial Goals is Tough

Only 1 in 4 people have a financial plan in place (do you?) and less than 45% of people have clarity on their financial goals. Less than 25% of millennials understand money management – things like budgeting, saving, investing, etc (Source: Business Insider / Schwab / Gallup). On the other hand, a smartphone user, on average, has 3 personal finance apps on his phone. When the pandemic hit, there were 1.3 billion downloads of personal finance mobile apps in just Q2 2020. If you search for personal finance and investing books on Google, you'll find results like "Top 100 books on personal finance". What does this data tell you?

"We have all the knowledge, tools, and apps to make it convenient for us to learn, create and successfully execute a financial plan. Do we have the will and consistency?"

The real challenge is going from "Knowing" to "Doing". It's easier to talk in generic terms rather than sit down and write your own financial goals -- things that are meaningful for you.

Financial Goals: What are they?

Financial goals are meant to be personal. What is important to you may not be necessary for your close friend or cousin. Your financial goals may change over time too (though this is a slippery slope). Everyone looks at money from their lens. So, best not to compare your goals with anyone else. That being said, here are some financial goals people set for themselves. This list can be used as a checklist or a starting point to create your financial plan.

1. Ownership: Own a home, car, mobile, and laptop.
2. Emergency Fund: Build an emergency fund for a rainy day.
3. Retirement: We still live in an era where people plan for retirement. This may change in the future, but if this is important to you, you should jot it down as a goal.
4. Travel: Most people enjoy traveling within India or abroad. Some more than others.
5. Education: Educate yourself and your children. This can include schooling to higher education. Many Indian families don't view education as an expense, and many higher education institutes in the US, Europe, and ANZ are banking on Indian students.
6. Health and Fitness: One of the highest expense items after age 40 is healthcare. Many people are spending a significant amount on medical expenses or fitness.
7. Wedding: The big fat Indian wedding requires a big fat wallet and a plan to make it a reality.
8. Startup: 9 out of 10 Indians want to start a business. We are an entrepreneurial nation. It is a wish of many but starting a business requires money, and not everyone can or wants to raise venture capital funding for their business.
9. Hobbies and side projects: Whether you want to play the guitar or launch your latest Web 3.0 project, you can plan for it by making this one of your financial goals.
10. Vacation home: Owning a vacation home is a wish for many people. 
11. FIRE: Financial Independence, Retire Early is a concept popular in the west and gaining popularity in India. Some want to retire in their early 40s, which can be planned for. 
12. Family and Friends Support: Few people I know go out of their way to plan to support their friends and family members financially to either help them or get their business off the ground. You could be one if you plan for it.
13. Philanthropy: Many people contribute toward the growth of local communities. You take care of not just yourself but the people around you. 

Have I missed any other financial goals? Drop a comment, and I'll edit this article to include it in the list above.

Making Financial Goals Your Own

It would be best if you didn't copy-paste others' financial goals. Yet we spend a fortune keeping up with the Joneses. Go back to Your Financial Reality and create a list of financial goals that are important to you.

Action of the Week

Step 1: Refer to the list above and write everything you want from life. 

Step 2: Prioritize the list in buckets of "High", "Moderate", and "Low". For example, owning your first home and setting up an emergency fund may be a high priority, while startup and philanthropy may be a low priority right now.

Step 3: Prioritize each goal as "Short Term" or "Long Term". Anything more than one year could go under the long term. 

Step 4: Now, write a number against each financial goal. It's OK for you not to have an exact number. Close enough is good enough at the start and you will gain clarity as you go deeper into this subject. For example, an 'Emergency Fund' could equal 12 months of your expenses. Travel could include 3 local trips in India and one international trip amounting to ₹3-4 lacs/year. 

Step 5: Reach out to your friends, and family members whom you believe are good with money and have a money talk with them. Ask them how they set their financial goals and arrived at amounts against each goal.

Step 6: Decide on your own. You can't outsource money management to anyone else – elders in the family or a financial advisor. It's your money and your life, so it should be your own financial goals with an amount representing your needs and desires. Take as much advice as you need to arrive at a decision but taking ownership of money matters is essential.

Some financial goals are more important than others. Needs must come before wants. You may want the iPhone 13 Pro, but if you don't have an emergency fund of 6-12 months' worth of expenses, it's probably not a good idea to buy that iPhone first. Here are how people typically prioritize their financial goals. Again, these are for reference only, and you should look inwards to determine what's essential for you.

Moment of Clarity: How does it feel to know what financial goals you are going after? To know what is essential to you in your life? 

"A goal without a plan is just a wish" ~ Antoine de Saint-Exupéry

Thanks for reading!

Darshan Doshi