How to convert your your financial goal into reality?

Achieving a financial independence is a dream for most of us, but it requires the planned efforts and right implementation which can bring your dreams into a reality. 

​Every big thing starts with one step at a time and with your consistent efforts you too can achieve the financial independence. The realization of the financial goal is a step by step process, exploring each step during the journey and taking the right decision.
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I will be discussing such important steps in this post which will lead to the realization of the financial goal.

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Specific Goal
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You must have a financial dream which you can fulfill, If I describe it in my own words, then I say that goal is a destination which you envisage or imagine in your mind.

The goal has two main elements, one is the specific time limit and the other is its quantification.

I quote an example of an ideal goal like I say my goal is to reduce 5 Kgs weight (quantification) in 3 months (time limit) and absence of any of the two elements results in the mediocre results.

​Therefore, in order to fulfill your financial dream your goal must include both the elements of the quantity and the time period in it.

"Defined time-period and quantification are the 2 main elements of any goal."

A few examples of the goal:

• My goal is to save Rs. 4 lakhs in next three years for the international vacation
• To earn at least 15% return per year out of my investments
• To save at least 500 units of electricity every year

All the above examples include both the elements that are Time period and the quantification. This makes the goal specific in nature which motivates you to take concrete and conscious steps to realize it.

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Breaking Down
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You can have multiple goals before realizing your ultimate financial goal. Each one of us has financial goal at the different stages of life like you need money for vacations in next 3 years, money required for children education and then marriage and in the last money required to finance your retirement.

So, you need to break down and keep on realizing your goals at the different stages of life. The breaking of goals will act as a milestone for you towards the final realization of the goal.

Your Present Net-Worth
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After setting your goal, your next step is to know the distance between your goal and the present condition or the situation. The farther you are from your goal, the more and consistent efforts you need to achieve it.

 Your present financial position or the net-worth is the difference between your income source and the expenses, and other financial obligations like interest on loan etc.

Let me explain the concept with the help of an example:

• My goal is to save or earn Rs. 4,00,000 in the next 5 years
• My annual income is Rs. 3,00,000 and my annual expense including all the obligations is Rs. 2,50,000, then my net-worth will be Rs. 3,00,000 - Rs. 2,50,000 = Rs. 50,000.

I can say very easily by looking at the above two figures that if I keep accumulating the same amount of Rs. 50,000 every year, then I will end up saving only 2,50,000 at the end of the 5th year, a 60% achievement of my goal.

​Now, it is clear that I need to accelerate my saving every year so that I can achieve my goal of earning Rs. 4,00,000 at the end of the 5th year.

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Forecasting and Extrapolating
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Now, you have to find out the minimum rate at which your net worth should grow in order to achieve the goal in the specified time limit.

The extrapolating and the forecasting will let you know the minimum value of the growth rate.

Let us understand with the help of an example:

• My Net-worth: Rs. 50,000
• My Goal: Rs. 4,00,000 in the next 5 years
• Minimum growth rate: 16.1%

Make a Strategy
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I have set the goal and determined the growth rate to achieve my goal in the defined time limit.

Now, I have to devise or formulate a strategy/plan to achieve this growth rate. Here, I should find out all the feasible investment options like be FD, RD, Stock market, Bullion market, and Real estate along with their average return they offered to their investors in the past.

I think, instead to investing the whole amount in one asset category, it is better to diversify it into different asset categories, helps in mitigating the risk by allocating the amount into different assets.

I should spread my investment in different asset categories in such a manner that it offers me an average return of 16.1% over the period of time and helps me in the realization of my financial goal.
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Example of the asset allocation:              

• I can also try to work hard, sincerely and smartly in the office so that my boss offers me the incentive or the promotion, resulting in the income rise which I can re-invest into the different asset categories.​​
• Simultaneously, I can plan to cut down my irrelevant expenses so as to increase my savings.

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Risk identification and Insurance

As I told you that realizing a financial goal is a long term process which is just like running a marathon where you fall and rise many times but still you have to keep on moving to achieve your target.

Here, I need to analyze every risk associated with it like:

• Risk to the health
• Risk of life
• Risk of assets
• Risk of decrease in the amount which is invested in the stock market, bullion market and the real estate.  

After the identification of the risk, I need to determine the probability and quantify the amount of the risk associated while achieving my goal.

The probability of the occurrence of the risk and its quantification help me in determining the right amount of insurance cover for me and my assets.

The under-insurance of an uncertain event in your life can put your goal upside down and make you to start from the beginning.

​Therefore, it is very important to insure your precious things like health, life and financial assets & other precious metals so that you can sail smooth in the journey towards the realization of your financial goals.

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Consistent efforts
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All the above things can only be possible if you consistently stick what you have planned and keep on taking one step forward every day, then only you will be able to achieve your financial goal.

The longer you are consistent in your efforts, the easier it become to achieve your goal. A small amount invested regularly can become a handsome amount over a period of time because of the effect the compounding.

​It is better to invest small amount regularly then to wait and invest the large amount later in your financial journey.

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Final Note
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The realization of the financial dream is just like any other dream which needs a  defined path, milestones at the regular intervals, accurate forecasting, effective strategy, right asset allocation, regular investment and last but not the least, the consistent efforts.​ 
Do not wait for tomorrow, set your financial goal today because the early you start, the more are the chances of achieving it time.