What is Goal-Based Financial Planning?

In life, they say, there are no shortcuts. Well, the same concept holds for the world of investment. When we talk about managing your hard-earned wealth, you cannot afford to take a shot in the dark! Instead, you require a strategy to help you achieve your investment goals effectively. This is where goal-based investment planning comes into the picture. Keep reading to learn all about this systematic investment method.

Goal-based financial planning: An overview

Every investor must have some financial goals they wish to achieve by putting their funds in an investment instrument. Be it buying a house, early retirement, your child’s education or achieving financial independence. And goal-based financial planning is the way to achieve all your investment objectives across different life stages. It is a relatively new wealth management approach that focuses on investing to attain specific financial goals.

Additional Read – How to Plan Your Investments via Goal-Based Investing with Moneyfy

Importance of goal-based financial planning

Are you wondering why you must follow this method? Well, as you know, saving money is not enough when it comes to ensuring financial success and security in life. To achieve your short-term and long-term financial goals, you must put your money to work and invest it in different financial tools. But how to estimate how much you need to invest to achieve your goals? Through goal-based planning!

Furthermore, financial planning also prepares you for financial adversities like an unexpected loss of employment or medical emergencies. This way, you can ensure your family’s financial security at all times and have peace of mind. So, what are the steps involved in this method of financial planning? Read on to find out.

What are the steps involved?

Step 1: Decide your investment goals

Before you go ahead and put your funds in mutual funds or other investment vehicles, you must set clear financial goals for yourself. What are your expectations from the investment, and what exactly are you saving for? Answer these questions to set your goals that will act as the foundation for your investment journey.

Step 2: Make a budget

Once you have a clear idea of your goals, it is time to draw a budget to know how much you must save and the amount you must invest in financial instruments. Consider your monthly expenses, assets and liabilities to create your budget.

Step 3: Assess your risk appetite

The next step is to assess your risk profile because you must take the right amount of risk to achieve your financial goals. Be mindful that your risk appetite depends on your age, financial situation, income, stage of life, etc. Thus, before allocating your funds to different investment methods, measure how much risk you can afford.

Step 4: Prepare an investment plan

Finally, calculate how much you need to save and invest based on the goals you have in mind. If you feel you don’t have enough savings to invest in your financial goals, don’t despair. Remember starting small and investing through SIPs makes a ton of sense and will help grow your wealth over time.

Additional Read -What are you chasing? The importance of setting realistic financial goals

Wrapping up

Many first-time investors make the mistake of entering the investment world blindly. However, having a clear purpose enables you to select the right investment products that help you fulfil it. Lastly, Tata Capital’s Moneyfy app makes investing a piece of cake as it helps you choose the right products that align with your goals.