Why is Goal Setting an important part of Financial Planning?

Setting goals is an essential part of building wealth and getting your finances right. Whether it's work or any other important task, setting goals makes the task clear and measurable. Once you set your goals, you can immediately take action and work towards achieving them. No matter what we're aiming for, especially in the financial realm, it's important to set goals.

Here are six reasons why goal setting is so important to your financial health.

1. You Must Have a Goal

Suppose you save some money, invest it, and gradually increase the amount you invest. Are you doing this? What do you want to achieve? How will you judge whether you have succeeded or failed? How successful will you be?

All of these questions can only be answered keeping in mind your investing goals. For example, if you want to buy an SUV for 18-20 million, you have a clear goal in mind. If you invest for five years and accumulate assets worth Rs 2 million by the end of the period, it is a success. If not, you'll know how much you're missing from reaching that number.

Knowing the end goal is very helpful as it helps you choose the right path considering all other influencing factors.

2. Brings Clarity

Having your financial goals in mind will always help you understand where you are and determine where you need to get to. It always serves as the driving force towards the final destination of your financial journey.

Setting financial goals tells you how much you still need to save and invest to reach your goals. More simply, quantify your goals with measurable numbers. Instead of saying you want a luxury car. It would be better to say clearly that you want a luxury car worth 1 million rupees. 300,000 yen. This will help you understand how long it will take to reach that number, and also allow you to regularly measure where you are.

3. Helping you adjust to change

Life is unsure so you have to continually be organized. By setting desires, you can systematically paintings towards achieving them and preserving your legacy. As your life changes through the years, so do your dreams. Depending in your own family’s needs and different commitments, your preference to shop for a luxury vehicle can become shopping for the right sedan to your own family

Since you’re already operating closer to your intention of buying a automobile, you can put together for this unexpected purpose exchange and alter your strength and price range for that reason.

4. It helps you formulate a strategy

Strategy formulation is an essential element to achieve your financial goals. Even if you have set goals and enough funds to invest, adopting the wrong strategy can be very detrimental to the financial health of your portfolio.

Setting goals gives you clarity, which in turn facilitates the selection of the right funds and determines the strategies you will pursue in your portfolio. A healthy portfolio is a combination of clear goals, adequate funds, diversification and the right strategies.

5. It helps you stay focused

Goal setting is also beneficial mentally. It helps you focus on your ultimate goal and prevents you from getting distracted by destructive ideas. Always focus on achieving the numbers you set and don't get distracted.

A focused mind does not make decisions based on short-lived but highly harmful impulses. When you are stuck managing your finances, you become extremely vulnerable to sudden urges and impulses.

6. Helping You Make Better Choices

When you enter the world of stock markets and investing, you are exposed to hundreds of options that can be very confusing. As a beginner, you don't want to make mistakes that will take you a lifetime to correct. Even if you are an experienced investor, you need to have your goals in mind before investing your money.

Setting goals is very beneficial in choosing the right type of product to invest in. You can choose investment vehicles depending on your long-term and short-term goals.