The Goals

It takes money to achieve one's financial goals. Unless one is incredibly lucky or incredibly rich, most of the time, there may not be enough to satisfy all goals.

Therefore, when setting goals, one needs to look at his/her priorities in life and decide what are the must-haves and what are the nice-to-haves. For example, funds to see the children through university may be a must-have while funds for a cruise holiday may only be a nice-to-have.

The financial plan then needs to encompass all goals that are must-haves. The nice-to-haves can be put aside for later, when there is a surplus.

It also takes time to achieve one's goals.

Therefore, it is best to also sort out goals into those that are short term, medium and long term. This is because financial strategies for each objective may vary depending on the time horizon envisaged. For example, the following financial strategies may be employed for various time-related goals:

1. Immediate     There may be risks that one currently faces that require immediate attention. These would be, for example, the risk of accidental death of the sole breadwinner in the family. The financial strategy here would be to take immediate insurance cover for terms that match the person's affordability.         2. Short term     If, say, a car is to be purchased through hire purchase, the goal would be to meet the down-payment amount. This may require funds to be set aside that, while earning some return, are sufficiently liquid to be used for the down-payment.

		3.	Medium term
			The purchase of a house may be an achievable objective in the medium term. This would require financial discipline to keep aside sufficient funds on a regular basis that may be invested in, say, growth funds that earn a higher return than bonds and deposits.
		4.	Long term
			Many of life's financial goals are long term in nature, two common ones being the provision for children's education and for retirement. Because of the long time frame, the financial strategy could be to invest in more aggressive funds while young, when more able to take risks, and gradually moving towards less risky, more income-oriented, funds as one gets closer to retirement.

The Stages >>

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