Arti Arora, CFP | Head Financial Planner

Investing is for the wise and splurging is a vice.

Excesses are always harmful and this is true for just about everything is life. Sometimes, in life, we don’t even realize and we tend to over indulge because we forget to keep a tab of our budgets or do not quantify financial goals for ourselves. This lack of awareness can prove to be quite a mess as far as our financial aspirations are concerned and is almost akin to us going to an unknown destination without any road map or basic directional outline.

There can be many ways to invest. Sometimes you study relevant facts and then take investment decisions. Sometimes you seek a friend’s or a neighbor’s advice or you may also refer to your bank advisor or any other financial advisor who may guide you about seemingly suitable products. However, there is one thing common to each of these forms of advice you may receive; and that is Ad-hoc.

Just investing, if you have some idle money can never be rewarding or fulfilling. Empirical studies have revealed that the best way to invest is to link it to your financial goals. This helps in many ways, though I will bring two important ones here:

A. it gives an objective or purpose to your investment so you are not taking a blind shot with them and

B. you have a benchmark against which to track progress and take corrective action whenever and wherever need be.

Purpose, Goal, Objective and Reason are some adjectives and there could be many more synonymous words that we use in common parlance for our lives and its sanity. The financial aspect of our lives is no different and with goal based investing comes up the most powerful and logical approach to marking, making and monitoring our investments.

Let us illustrate this with an example – Rahul and Smriti both receive an annual bonus of about Rs.3 lac. They discuss about how to effectively use this money. While Rahul decides to use this amount to pay for the down payment of his car, Smriti gives a deeper thought and while she too had the car purchase goal on her mind, she decided to prioritize her goals. She decided to defer the car purchase and instead used a part of this amount towards a course she had been looking to do (to better her job results) and invested the balance amount in a well derived mutual fund portfolio. In a span of a year, she got her promotion (and with that a company sponsored car too) and her well-planned and timely reviewed portfolio earned her handsome returns that she used towards her next high priority goal of house purchase.

Sometimes in life, a deeper thought opens up unexplored avenues and helps one to decide more prudently after taking account of one’s life situation holistically.

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