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The A-Z of Goal-Based Financial Planning: Steps, Tips, and Benefits

Financial literacy and being good at managing your money are necessary skills for everyone. It’s about handling your finances wisely. In India, many people struggle to reach their financial goals or end up in debt because they don’t plan their finances well. But financial planning isn’t just about making money and investing it. It’s about setting clear goals for your money.

So, what is goal-based financial planning? Let’s find out!

What is Goal-Based Financial Planning?

When you start your financial planning, the first thing to do is set your goals. These goals will guide all your money choices, like where to invest and how long to invest for. Setting financial goals means taking steps, like deciding what you want to achieve with your money and making decisions to make those goals happen.

Importance of Goal-Based Planning

Goal-based financial planning is important for making the right financial decisions. If you’re not sure what you’re saving for, you might make mistakes with your finances over time. Creating a well-organised plan based on your goals will help you in this process.

Save More

When you have clear financial goals, you can manage your money better. One popular way to save is using the 50-30-20 rule, which means you spend 50% of your income on necessities, 30% on things you want, and save the remaining 20%.

Disciplined Investing

You will inculcate the habit of minimising risks and costs with a wise asset allocation strategy. 

Tax Planning

Financial planning isn’t just about investing; it also involves tax savings. To do this, you need to put your money into assets that qualify for tax deductions. Some of these assets include ELSS and tax-saving mutual funds, insurance plans, PPF, etc.

Peace of Mind

By planning carefully, you can be confident about reaching your financial goals over time. Goal-based financial planning keeps you motivated and prevents you from procrastinating. Knowing that your financial future is in good hands also gives you a sense of security and peace.

Steps Involved in Goal-Based Financial Planning

If you want to do goal-based financial planning, simply follow the steps below:

Decide your investment goals

You can have different financial goals like buying a dream house, exotic vacation, retirement planning, etc. To get an idea of the financial goals you can pursue, check out the Multipl app

Create a budget

Your budget depends on your investment goals and time horizon. Start by figuring out the value of your goals in today’s terms. The first step in budgeting is deciding how much you need to reach your goal. Then, divide the total into smaller targets. This makes it easier to plan your investment budget.

Time horizon for investment

Once you know the value you need to fulfil your goals, you must decide the time horizon for your investments. You can invest for short-term, medium-term, or long-term returns.

Assess your risk profile

Your risk profile will play a crucial role in deciding the asset class for investing. The general rule says – the higher the risk, the higher the return. If you are planning for a long-term investment, you can invest in risky avenues like equity mutual funds. However, if you want to invest for the short term, you shall invest in secure avenues like debt funds and fixed income instruments because the safety of capital invested is important in the short run.

How multipl Helps You With Your Investment Plan

multipl is the world’s first “Save Now, Pay Later” app which helps you create goal-based investments.

Based on the duration, purpose, and risk profile, multipl allocates appropriate assets (mutual funds) in your personalised investment portfolio so you can reach your goal with maximum safety and liquidity. You can create both short-term and long-term savings goals like Gadget Goal, Vacation Goal, Child’s Education Goal, Retirement Savings Goal, Down Payment Savings Goal, and many more. In addition, brands co-invest with you to save more towards your goals.

Wrap Up

Goal-based investing can do wonders for your financial health and, if properly followed, can help you fulfil all your financial goals. However, always analyse the assets before you start investing in them. To learn more, download the multipl app on Android & iOS now

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