To achieve financial stability and success, it is important to have financial goals.

These goals have to be classified as short term (less than 5 years), medium term (5 to 10 years) and long term (above 10 years)

You can follow these 10 simple steps:

  1. Classify your goals (short/medium/long)
  2. Take each goal separately
  3. Write it down in a diary or in a micro soft excel spreadsheet
  4. Work out the present cost of each goal, factor in inflation (take an average of 8 per cent annual), number of years left to the goal
  5. Using the formula of future value (taken in excel spreadsheet) find out the future value of that goal.
  6. Now, record your monthly net income and expenses, find out how much do you save every month.Write down all your expenses to get a real idea of your savings every month.
  7. See how you can increase income and reduce expenses to maximize your monthly savings
  8. Now, allocate some portion of your savings to each of your goals.
  9. For this, you will have to prioritize your goals, once you list them, identify the most important first and then the second and so on and so forth.
  10. Meet your investment advisor/financial planner and work out the amount of savings currently required to achieve each of your goals systematically.

Now, let us take an example of financial goal planning.

Assume that a young couple is planning to fund the education cost for their child who is currently aged 3 years.

Let us look at what should be done in two parts.

First part is to calculate the future value of money required. This is done in four simple steps.

Step 1:Calculate the present value

Note down the present value of the fees for the following:

a.pre-school course

b. primary and secondary school (standard 1 to 10) (standard 11 and 12)

d.Professional courses (medicine, engineering, chartered accountancy, pharmacy, MBA, architecture, interior design etc.)

You can do all this by the following method

a.Call OR visit the nearby schools and colleges in your area to enquire about the fees and total cost OR look up on their websites on the internet and get as much information on total cost as available

b.Add 25 % of the total cost on miscellaneous items like transportation, uniform, books, materials, school activities.

c.Add a certain number(Rs X) for tuition / coaching class fees (Call OR visit coaching classes personally or through their website to get the exact amount)

Make a final total figure and record this in a diary or in Microsoft excel program in your personal computer.

If there is more than one child, then you must do the same for each child.

This is a one-time compulsory exercise which must be done to get a realistic figure of the total current cost.

Step 2:Factor in “inflation”

Over the long term, it is advisable to factor in 10% as the annual rate of inflation in the education sector.

Step 3:Calculate the “future value”

Using an excel spreadsheet OR using many free “future value calculators” available on the internet, you can find the “future value” of the amount required for the child’s education.

Example: if the present value of the total cost of education is Rs 15 lacs then using a 10% annual inflation rate, the future value after 10 years is approximately Rs 38.90 lacs

Step 4:Find out the time period when money is actually required

Since you require the money at various intervals for education and not at the end of the period, you must write down the indicative date and the amount you will require.

Second part is to make a plan to save and invest to get the money required. This is done in three simple steps:

Step 1:Understand your “Risk profile”

Meet your investment advisor / financial planner as most of them have a risk profiling tool. This will test and bring out your risk profile in 10 to 15 minutes.

Broadly, risk profile is classified as: Conservative, Cautious, and Moderate OR Aggressive.

Step 2:Understand your “Income” and “Expenses”

List down all items of your monthly income and expenses so that you get a clear picture of your monthly savings…

Remember that both the husband and wife will have to make joint efforts to maximize family monthly savings by spending only on “needs” and avoiding “wants” and “desires” and “likes” so that these savings are invested in financial products which match their risk profile which will finally help them achieve their “goal” of arranging for funds for their child’s education expenses.

Step 3:Choosing the right investment product

Take these steps in the order of priority

  1. Insurance

Since family is dependent on income, take a“pure term online insurance plan”(these plans give you highest protection for lowest cost) for asum assured which is equal to the household’s monthly living expenses for the next twenty years.

(example: ifmonthly household expenses are Rs 30,000 then take a sum assured of Rs 30000X12X20 = Rs 72 Lacs without factoring in inflation)

Factor in 8% annual rate of inflation to arrive at the final amount using the inflation calculator.

Many calculators are available on the internet which you can use to arrive at the amounts. You can also approach a financial planner or investment advisor for guidance.

  1. Mediclaim

Medical and hospitalization expenses are very high now-a-days and an unforeseen disease/accident can completely disrupt thefinancial plan, by reducing the bank balance substantially.

To protect the family,buy a low-cost family floater mediclaim policy.

  1. Emergency funds

Invest an amount equal to 6 months of your living expenses in a liquid fund or fixed deposit to take care of any emergencies.

  1. Stock OR Equity mutual fund SIP (systematic investment plan)

It has been proven that equities have outperformed Inflation by a wide margin in the long term.

The value of BSE Sensex has increased from an index level of 100 in 1978-79 to 24500 levels in 2016 which shows that returns on a long-term basis are in the range of 13 % to 15% p.a.

Additionally when you invest for the long-term say 10 years or more… all returns are tax-free as per current tax laws.So, after you have invested as per the three steps in point no. a, b, and c listed above, put all your remaining monthly savings in a Stock OR Diversified equity mutual fund portfolio by registering for a SIP (systematic investment plan).

The benefits of SIP are:

•It removes the emotional guesswork of trying to predict the stock prices and fund net asset values as making predictions is a complete waste of time.

•It gives you a complete discipline in buying stocks and funds at pre-defined time periods

•So, when the stock prices and fund values are down, then for the same fixed amount of money, you get higher number of shares and fund units and conversely when the stock prices are up, you get lesser number of shares and fund units, thereby over a long period of time, you get the average price.

You can invest through a Stock SIP OR a diversified equity mutual fund SIP

  1. Which funds to choose?

Chose the funds which are aligned to your risk profile (Example: if your risk profile is aggressive, then you can invest in small and mid-cap funds)

Spread your investment amount equally into three or four funds.

Contact your financial planner or investment advisor today to know which equity mutual fund schemes is the right fit for you…based on your risk profile.

Lump sum money

Whenever you receive such bulk amounts either as lottery, bonus, and inheritance or from any other source, use this money to top up/ add to your SIP

In the example earlier we had seen that after ten years, an amount of Rs 38.90 lacs is required to fund the total cost.

Using 12% as the annual rate of return for a SIP in a diversified equity fund, the monthly amount required for you to invest is Rs 17,000 per month for 10 years. This will generate Rs 39.10 lacs at the end of 10 years.

This will meet the total cost of education for the child.

In the same way, if you have any other “goal” for the child (example: child’s marriage OR business set up expense) for the future, you can calculate the present cost, use inflation factor, find out the future value and calculate the amount of monthly SIP required to fund that goal.


Present value of marriage expenses: Rs 25 lacs

Inflation factor: 10 % per annum compounded annually

Time period: 25 years

Future value: Rs 2.70 crores

Monthly SIP required (assumed return of 12 % p.a. for 25 years): Rs 15,000

Like-wise you can calculate the SIP amount required to invest for each of your future goals.

Contact your investment advisor OR financial planner today!

Work out your goal, financial plan and register for your SIP immediately!

Happy investing!

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.