From Dreams to Reality: Converting Your Financial Goals into Actionable Plans

Do you remember when you dreamed of purchasing a penthouse or starting your own business? But your plans were postponed because you realised you couldn't afford them since you had to pay your children's tuition fees and manage your parent's medical expenses. At some point in life, unexpected events can happen that can derail our plans and dreams, either because finances are insufficient or because we haven't adequately planned for them. However, our financial circumstances do not have to determine the course of our lives. With a little bit of financial discipline and early planning, not only can we realise our aspirations, but we can also secure a stable future for ourselves and our loved ones. Here are some ways you can turn your financial goals into actionable financial plans and your dreams into reality:

1. Dream:

You cannot achieve great things if you don't dream about them. While dreams can be fun to imagine, they remain abstract and unfulfilled until we take action towards them. For example, if you dream of buying a penthouse in a prominent area but fail to save adequately, your vision may not materialise. However, if you transform your dreams into realistic goals based on your desired future, you can take measures to bring them closer to reality.

To transform your dream into an achievable goal, you should evaluate its feasibility. While it is admirable to have ambitious dreams, it is crucial to differentiate between your goals and your dreams. Everyone desires to be affluent, live luxuriously, and purchase everything they want without financial constraints. However, you should understand that these aspirations represent dreams, not concrete financial goals.

While it is necessary to differentiate between your dreams and goals, you should not confine yourself to what appears to be practical and/or traditional. You have tremendous potential, and the opportunities available to you are boundless. Think creatively and aspire to achieve great things!

2. Define Your Goals:

Take note that defining your financial goals is the most important step towards accomplishing them. Without a well-defined plan, it is unlikely that you will achieve your goals within your desired time frame. The S.M.A.R.T. framework is an effective method for setting and achieving personal financial goals. It ensures that your financial goals are Specific, Measurable, Achievable, Realistic, and Time-bound, all of which are crucial in helping you achieve your financial aspirations.

Specific: Your financial goals should be specific, with a clear outcome that you aim to achieve, such as saving a specific amount of money for retirement, buying a house or a car, investing for children's higher education, etc.

Measurable: Your goals should be measurable, allowing you to monitor your progress and determine when you have accomplished them, whether it is in terms of a specific amount or a percentage of your income.

Achievable: Your financial goals should be attainable based on your current financial situation and available resources. It is essential to set realistic and achievable goals, avoiding overly ambitious or unrealistic expectations.

Realistic: Your financial goals should be realistic, considering your current and future financial situation and your capacity to save and invest.

Time-bound: Your financial goals should have a deadline for completion. This will help you stay accountable and provide a sense of urgency to achieve your goals.

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3. Understand Your Financial Situation:

When you assess your finances and set S.M.A.R.T. financial goals, you will have a clearer picture of your current financial standing and future financial aspirations. To make progress towards achieving your financial goals, it is essential to determine your current income or expected income in the future and the amount required to fulfil various objectives. Once you have calculated the amount needed to achieve your financial goals, you can determine the shortfall, which is the difference between your present financial situation and your desired financial position.

4. Prepare a Budget:

Budgeting is a way to manage your income and expenses effectively. It involves creating a detailed plan of your expected income and expenses for a certain period, typically a month. There are many free budgeting tools available online. However, you can start with a basic MS Excel sheet. Budgeting on a yearly, monthly, and weekly basis can help you make informed short-term and long-term financial decisions, prepare for unexpected expenses, and work towards achieving your financial goals.

5. Be Disciplined:

Achieving any goal requires a disciplined approach. With consistent effort and a strong determination to excel in your chosen field. This is where financial discipline plays a critical role. By starting early and investing a portion of your income in well-researched opportunities, you can watch your wealth grow and build a solid nest egg for the future. With a disciplined approach, anyone can manage their expenses, set aside a portion of their income, and plan their targets well in advance to achieve their dreams realistically.

6. Consider Inflation:

It is a good idea to assess your investment portfolio and ensure it can keep up with rising prices to beat inflation. Many Indians still prefer traditional investment options like Fixed Deposits (FDs) and government-backed products, but these may not provide inflation-adjusted returns in the long term. If the interest rate on your investment is less than the inflation rate, the value of your investment will decrease, and your purchasing power will be diminished. There is no single investment that can guarantee inflation-beating returns, so it may be necessary to diversify your investments.

Hence, it is advisable to diversify your investment portfolio with asset classes that typically perform well during inflationary periods. By including inflation-beating asset classes like stocks and equity mutual funds in a diversified portfolio, you can take advantage of opportunities when inflation occurs. It will help you reduce the overall risk of your portfolio and increase its potential for returns. However, while diversifying your portfolio, make sure you consider your investment objective, investment horizon, and risk appetite.

7. Start Investing:

Once your financial plan is ready, you should not waste time but start investing in line with your risk appetite, investment goals, and investment horizon. Investing in mutual funds through a Systematic Investment Plan (SIP) is a great option for both new and seasoned investors to gradually build a portfolio and generate returns that can beat inflation. SIPs utilise the power of compounding and rupee cost averaging, which can be very effective in creating wealth in the long term.

8. Create a Contingency Fund:

Planning for unforeseen events through a contingency fund is as essential as investing in specific financial goals to ensure that your financial plan remains intact and you do not have to liquidate your investments in the event of an emergency. The contingency fund should be easily accessible to cover unexpected expenses, such as medical emergencies or job losses. Experts suggest setting aside at least 6 to 24 months of living expenses in a contingency fund. With this fund, you can avoid tapping into your savings or incurring debt to cover unexpected expenses. It is essential to contribute regularly to your emergency fund and use it only for genuine emergencies and not for discretionary purchases. You can initiate investing in a separate savings account or investment option that allows for withdrawing funds during an emergency. This will provide you with peace of mind and ensure that you are better prepared to handle unexpected events that could impact your financial planning.

9. Review Your Financial Plan Periodically:

Regularly reviewing your financial plan ensures that your investments are still appropriate for your goals and increases the chances of achieving those goals. It also helps in adjusting the portfolio to any personal or economic changes that may occur in the future. For example, it is possible that a particular equity mutual fund may not be performing well or changes its investment objective. Hence, it makes sense to review your plan frequently and eliminate any investments that no longer align with your objectives.

10. Stay Motivated:

Even with the most well-thought-out plan, unexpected obstacles may arise, such as a rejection from a sought-after opportunity. It is essential to not allow such disappointments to deter you from your goals. Though setbacks can be disheartening, they offer chances to gain knowledge and progress.

To conclude:

Turning your dreams into well-thought-out financial plans is crucial to achieving financial success. Following the steps discussed in the article and staying committed to your plan can turn your dreams into a reality. Remember, it is never too late to dream big and start working towards your financial goals, and with the right mindset and approach, anything is possible.

KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

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Disclaimer: This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision.