Goal-setting holds key to better financial planning

Goal-setting holds key to better financial planning

The most critical part of financial planning is to do with the planning itself.

The most critical part of financial planning is to do with the planning itself. I mean most of us worry about the asset allocation, the type of investments that we pick, tax savings, etc. but the key lies in the goal-setting.

If we believe each individual is unique and so are their needs, goals and dreams then goal-setting is a vital aspect of the financial planning process.

Earlier, I have discussed about the need for financial planning for investors of all grades and now to the significant part of the financial planning. Most, planners included, however give more time on how the individual should earn and spend.

George Kinder in one of his books "Life planning for you: How to design & deliver the life of your own dream" asks three important questions.

Question one is: "I want you to imagine that you are financially secure, that you have enough money to take care of your needs, now and in the future.

The question is how would you live your life? What would you do with the money? Would you change anything? Let yourself go. Don't hold back your dreams. Describe a life that is complete, that is richly yours."

This question is more aspirational and invokes the innate desires one have that are to be achieved in their lifetimes.

This possibly sets out the intentions that one wants to do with their lives and how money figures in between all these.

This opens up on the question whether the quantum of money being aimed is sufficient or even questions the very needs we otherwise would have pursued in life.

It drives out the general relationship we assume about money and leads to complex issues beyond money into understanding ourselves better. This also points us to the ultimate question and goal; the very purpose of the entire planning.

He then further extends with his second question. "This time you visit your doctor who tells that you have five to ten years to live. The good part is that you won't ever feel sick.

The bad news is that you will have no notice of the moment of your death. What will you do in the time you have remaining to live? Will you change your life, and how will you do it?"

This question pits us about how we apportion our time between the needs, wants and desires.

It pokes us at how we go through our daily lives and how we ignore living today, the moment. If the first question points at the change as an option but now, it's very direct and what actions one wants to take.

It's no more aspirational or intentional but more of actionable. Now that the timelines are fixed and shrunk, poses our preferences at leading our lives.

The third and last question is a follow up to the second one. "This time the doctor shocks you with the news that you have only one day to live.

Notice what feelings arise as you confront your very real mortality. Ask yourself: what dreams will be left unfulfilled? What do I wish I had finished or had been? What do I wish I had done? [Did I miss anything?]"

Now this circles our priorities. Have we got them all correct and covered? This question no more helps one to concentrate on how one could have earned more or amassed more wealth but leads to queries on whether we had spent quality time with family or even on oneself.

This is a stage where most would ponder on what more could one have garnered as experiences, tastes, flavours, places, etc. than money. What's that one thing that would've bothered the most on the last day of our lives.

To visit this, through these three questions would change the way we look at our own lives, the goals and the way we conduct our lives, forever.

This allows one to come up with concrete ideas that are highly prioritised and taken to action. So, as investors and individuals these Kinder questions that have to be contemplated upon and as advisors these are to be prodded upon.

These questions greatly influence the way we think about life and as advisors provide different perspective to the investors' opinions.

(The author is a co-founder of "Wealocity", a wealth management firm and could be reached at [email protected])

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