Friday, 10 March 2017

Writing Down Your Financial Goals to Become Rich

We all have wishes and dreams, but the one that needs money to fulfill are actually our financial goals. Now, these financial goals could be anything, like your daughters higher education, her marriage, your bigger house, etc. We have these wishes, dreams, on our mind and in our heart. But do we write them down? No, we don't. The second thing we don't do is, we don't quantify our goals. Let us see, you want your daughter to have a higher education in the US, but what is the corpus you would need when she actually grows up, the third thing we don't do is, we don't set a timeline to a goal. Again in the example where you want your daughter to have higher education in the US, by what time you need that corpus?.


So again, you need to have a timeline to your goal. So what you see in front of you are the most common goal that people have, that is buying a house or shifting to a newer one, child's higher education, child's marriage and retirement planning. This list would go on. People actually like to buy a luxury car or they would like to go a foreign tour may be but these goals are the most common ones.

Let discuss this in terms of purulent polite again. They want to move to a bigger house after three years, 3.33 years that is in 2019, after they finish of their existing home loan. The current price of the house that the purulent polite wants to buy is 1 Cr. After 3.33 years if we assume inflation at 7% the price would be 1.25 Cr. Now how do you arrive at this future cost, there is a lot of inflation adjusted calculators available online, you need to put in the current cost of your financial goal, the time available and the inflation that you assume. You get the future cost of your goal.


Similarly, we calculate the cost of higher education of purulent polite daughters, who is six years old now. They need the corpus after 16 years that is 2032. The current cost of higher education abroad is 25 lakhs. And so the future cost works out to be 73.80 lakhs. Similarly for a daughter's marriage, as of today purulent polite wish to spend 15 lakhs rupees. They have 18 years in hand, so the corpus required in 2034. The future cost works out to be 50.69 lakhs.

The last goal yours is retirement. For calculating your retirement corpus, you need a retirement planner. Now these planners are again available online. There you need to put in your current age. If polite current age is 32 years, you need to put in your retirement age . For polite we put it 55 years. You need to put your life expectancy. For polite we put in 80 years. You need to put in your monthly expenses and polite monthly expenses are 48,000. You need to put in the inflation at 7% and if you wish to start investing today, you need to put in what is the expected rate of return. For the 10% rate of return the corpus works out to be 4.99 Cr. Now this is a very big amount and that preciously while writing down your Financial goals become so important. So until and unless you know where you have to reach and how you start your investing goals.