- To get back on track to achieve your goals, you need to look at the urgency of the goal, flexibility of your budget, prioritisation amongst the various goals and your ability to align your financial plans to realise them.
- See if you can reduce the goal amount or postpone the goal for a while if you are off-track.
- Plan early for your goals by saving and investing towards them. Prioritise your goals so that you focus on the most critical ones first.
- If you have to borrow to get to your goals, try to minimise your interest rate to mitigate the long term impact on your financial health.
All of us have a number of goals we have laid out for our lifetime – buying a house or a dream car, having a destination wedding or taking that world tour, paying for kids’ education or preparing for retirement. And likelihood is we have multiple goals set out for us at the same time. Now meeting these goals requires financial resources and most of us have a limited pool of these resources. So what should we do if we are financially off-track from meeting our goals as per our plans?
Fret not, there are multiple ways to address this and ensure you can achieve these goals in a way that is financially prudent. What you need to do is analyse relevant factors such as urgency of the goal, flexibility of your budget, prioritisation amongst the various goals and your ability to align your financial plans to realise them. In this post, we lay out the five key questions you need to ask yourself and look at some examples to better understand how they apply.
1) Can the goal amount be reduced?
The first option you should consider is whether you can reduce the budget you’ve set out for a goal without compromising on your ability to achieve it. Let’s say you want to take a 2-weeks Europe trip in the summer that will cost about Rs 10,00,000 for you and your family. However, you only managed to save up Rs 6,00,000 for this trip. You can consider flying a budget airline or living in an AirBnB instead of a 5 star hotel to reduce your overall expense. You could also consider shortening your trip to 10 days instead of the 14 days as originally planned. With proper budgeting and meticulous planning, you may still be able to make the trip happen.
2) Can the goal be delayed?
The second question to ask yourself for an off-track goal is whether or not it makes sense to delay the goal by some time. For instance, let’s say you are saving up to buy an iPhone worth Rs 1,00,000. If you don’t have enough to buy your phone just yet, can you wait a while longer to buy it? Is your current phone still in working condition? Will delaying your purchase by a few months affect your ability to operate normally? If not, it’s prudent to wait. It’s also worth noting that it is not recommended to tap on your emergency funds for such non-emergency expenses.
3) Can you save and invest more to get to your goal in time?
Calculate whether or not you will get to your goals based on your current rate of savings. If your calculations show you are off-track, relook your budgeting and explore options to save more. To give your chances of meeting your goal a further boost, invest your savings to grow them faster and get to your goals sooner. Having the farsightedness to plan for your goals in advance puts you in a better position to meet them and even upgrade them. We are building a tool to help you in your savings and investment journey.
4) Are other goals interfering with the off-track goal?
You may be planning for several goals simultaneously. Buying a car, a new phone and planning a trip all at the same time with the same pool of savings can be challenging. Decide what your priorities are. If your old car has reached the end of its life cycle and you can’t live without replacing it, you know what to focus on. The other two goals could be delayed or you could consider reducing your budget for them if possible. Keeping sight of what is important helps you put your resources to work in the right areas of your life.
5) Do you need to borrow to meet this goal?
Whether you should borrow funds to achieve your goals is contingent on the type of loan as well as the goal that you wish to achieve. For situations where a good debt sponsors a productive purchase, loans can help you achieve your goals faster, leave you financially better off and even help you make money if used wisely.
In case of a bad debt that is used to support a lifestyle beyond your means, for instance, taking a trip, you should first consider the above mentioned approaches to the goal. If that is not feasible and you are considering loans as a last resort, make sure you survey the various available options from banks and NBFCs to choose the best one with the lowest interest rate.
One of the key goals everyone must have is ensuring they are well-equipped to handle unprecedented situations such as loss of a job or medical emergencies that have significant financial impact. You should make sure your emergency fund reserves are sufficient to cover you in these scenarios. Only borrow in cases where the expenses surpass your emergency reserves and look out for loans that give you the most favourable interest rates and loan terms. You will be able to do so on the Cashvisory platform in the near future. Stay tuned!
Most of the approaches we have covered in this article are to assist you in case you find yourself in a difficult situation and off-track from your goals. However, with proper financial planning, you can maximise your chances of comfortably achieving all your goals in the time frame you have in mind. That’s what you should be striving for.