A “3D” Approach To Achieving Your Money Goals

We all know the importance of achieving Financial Goals – a good education for our kids, a comfortable retirement, a new home, an improved lifestyle or even a fun family vacation. Why, then, are only a handful of people able to achieve their Financial Goals while most unfortunately fall short? Here’s a simple nut powerful “3D” framework which will improve your chances of achieving your long term financial objectives for you and your family.

Discipline

The first and foremost rule of Financial Goal achievement is to be disciplined. The definition of discipline is to “do what needs to be done, even if you don’t want to do it”. It’s certainly difficult to prioritize Financial Goal achievement years in advance and make short term sacrifices for the sake of achieving your long term goals. It’s far easier to slip into the trap of seeking instant gratification. Spending money on “wants” that are more tangible and more immediately visible is so much more enjoyable! We’ve come numerous across clients who start off with all the right intentions, but lose motivation and focus along the way and end up stopping their goal linked savings after a few months or a couple of years. The people who end up achieving their long term goals on the other hand, are those who continue to save in a disciplined manner - with their eyes firmly set on the final outcome.

Delay Avoidance

Delaying the start of planning for your goals is another all too common mistake. What many people don’t understand is that there is a significant cost involved in delaying the start of ones savings! This is primarily due to the effect of compounding.

Let’s for a moment consider the example of one’s retirement. If you are a 30 year old with a goal of retiring at age 60 with a corpus of Rs 3.5 Crores, you’ll need to save approximately Rs. 10,000 per month towards this goal in a 12 per cent return instrument. It might surprise you to know that if you were to delay the start of this saving for a year (till you turn 31), you’ll end up retiring with Rs. 40.46 Lacs less! Yes, you read that currently. The cost of delaying your Rs 10,000 per month retirement saving by just one year is an astonishing Rs 40.46 Lacs.

People who end up achieving their Financial Goals understand the cost of delays, and therefore get started with their goal linked savings immediately.

Debt Management

Excessing debt is nothing short of cancer for your Financial Goals! Moving a step ahead of simply avoiding debt (such as credit cards or personal loans), one must aim to cultivate a “debt avoidance mindset” in order to achieve their goals.

Let’s take the example of saving Rs 20 Lacs for your 3 year old child’s future higher education in advance, versus taking a student loan for the same amount. To accumulate Rs 20 Lacs over 15 years, one only needs to save Rs 4,003 per month in a 12 per cent per annum investment – that’s a total “out of pocket” outgo of Rs. 7.2 Lacs. In the second option, one will end up repaying approximately Rs 27 Lacs on the Rs 20 Lac loan amount (due to interest expenses). So the simple decision of avoiding debt and saving in advance will save the individual Rs. 20 Lacs, which he or she can then commit towards other goals  - such as their comfortable retirement.

Put simply, a “debt avoidance” mindset which calls for saving in advance rather than relying on loans, not leveraging oneself with expensive debt, and living within ones means – are all important aspects of Financial Goal achievement.