Prioritize Financial Goals Rationally With Limited Resources
Personal finance and personal financial goal setting are intertwined when it comes to financial planning. Personal financial goals in life are always unique; it depends on person to person. There may be a big wish list but unless you identify your financial goals, it may look impossible to achieve all your wishes with the limited resources and time. Even after you identify all your financial goals in life, it may happen that you may not be able to fund them all at once. Therefore, one of the major financial planning processes includes an exercise to prioritize financial goals. Personal finance is subjective as everyone’s financial situation is different. It’s crucial to analyze and understand how to prioritize financial goals and figure out what to focus on first. As Financial Advisor in Kolkata, we involve in rooted discussions with our individual/family clients to empower them to rationally prioritize financial goals based on their subjective factors.
Are you too focused on specific financial issues like paying off debt or picking stocks? You need to take a “big-picture approach” to their personal finance.
Financial Life Goals Pyramid
The concept of pyramid approach in personal finances is to start from the bottom and move upward, rather than addressing all aspects at once. Structured financial planning processes equip you to minutely address all areas of personal finance and develop “Financial Life Goals Pyramid” for the family. Thereafter, you arrive at a position to prioritize your financial goals in life. The four aspects of “Financial Life Goals Pyramid” from the bottom to the top are “Needs”, “Wants”, “Dreams” and “Legacy”.
“Needs” are basic requirements for survival. It includes living expenses, shelter, education, healthcare, transport, insurance and taxes, etc. “Needs” are foremost for all and are beyond one’s desires.
“Wants” mean particular desires or plan of actions. “Wants” are expenses that help you to live more comfortably. They’re the things you own for entertainment or leisure. After fulfilling of needs, one may wish for bigger house, better education, comfortable retirement, vacations, car, career growth, etc. These may be termed as “wants” in one’s life.
“Dreams” may be defined as emotional feelings when someone may be envisaging. For “dreams”, it’s not necessarily that someone is asleep and imagining. It may include someone’s hobbies, charity works, world tour, own start-up or financial freedom, etc.
“Legacy” means leaving wealth behind for your children after your death.
“Plans have to be realistic; dreams don’t”― Richard Templar, Rules of Life: A personal code for living a better, happier, more successful kind of life
Prioritize financial goals – Assess what matters
Understanding the difference between “needs” and “wants” is a core component of financial literacy. Some financial goals can be delayed without major consequence. On the other hand, there are financial goals which one should never compromise for good. One observable fact is that your “wants” may be someone else’s “needs”. Your present life stage, personality, financial situation, etc. influences your “needs”, “wants”, “dreams” and willingness to maintain “legacy”.
It’s crucial to understand how to prioritize financial goals and help you figure out what to focus on first.
How to prioritize financial goals?
As Certified Financial Planner in Kolkata, we believe that you need proper communication with yourself when it comes to financial goals in life. Goals give you a starting point and a destination to reach. You need to pen down your list of goals, quantify each goal and define the time horizon for each goal, i.e. set mm/dd/yy for each goal. You have to mention the details of goals and write descriptions by using present tense. You have to visualize your goals according to your mindset/ body language/sensory receivers. You need to define the purpose of any goal. This exercise will make you understand whether it a “need” or a “want” or a “dream” or your willingness to maintain “legacy”. Thereby, you can rationally prioritize financial goals in life.
Conclusion
The beauty of financial planning processes is that you can review, update and monitor the progress towards your prioritized financial goals. Being SEBI Registered Investment Advisor in Kolkata, we lend credence in effective financial planning ensures that you have control over your incomes, expenses, assets and liabilities. Hence, you are in a better position to achieve your financial goals on time. In short, financial planning gives you a cruise control of your life and your future.
