Financial Goal Setting – SMART Goals
"I want to be rich" is a wish. "I want to save ₹1 Crore by age 40" is a Goal. Personal finance works only when you have a destination. Let's learn to set SMART goals.
1. Why Set Goals?
Money is a resource. A goal is the purpose for that resource.
- Direction: Tells you where to invest (Stocks for Long term, FD for Short term).
- Motivation: It's easier to say "no" to spending when you are saving for a dream house.
- Measurement: You can track if you are winning or losing.
2. The SMART Framework
Make your financial goals S.M.A.R.T.
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3. Case Study: The Dreamer vs The Planner
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4. Categorizing Goals by Time
Once defined, categorize them to choose the right investment product:
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5. Exam Notes: Writing the Answer
Question: "Explain SMART Goals with an example." (5 Marks)
Answering Strategy:
- S (Specific): State clarity (Buy a house vs Buy a 2BHK in Delhi).
- M (Measurable): State amount (₹50 Lakhs).
- A (Achievable): Realistic (Earn ₹50k, Save ₹10k).
- R (Relevant): Must matter to the person.
- T (Time-bound): Deadline (In 5 years).
Summary
- Mapping: Short-term goals needs Safety; Long-term goals need Growth.
- Inflation: Always adjust the "Measurable" amount for future inflation (₹10 Lakhs today = ₹17 Lakhs in 10 years).
- Review: Goals change with life. Review them annually.
Quiz Time! 🎯
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