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Manjari Jadhav and her husband are financially responsible, live on a budget and save a portion of their income. While Manjari has been working part-time so far, she is now ready to pay greater attention to her career so that she can contribute more to the family’s income. Despite their planning, the Jadhavs find that very often they are not able to fulfil their immediate aspirations and wonder if their more important long-term goals will be at risk.
Manjari wants to know how she can refine her financial planning. Manjari and her family have got the basics of good personal financial management right by planning for goals and living on a budget. One reason that they have been finding it difficult to meet their goals is that they have not fixed the order in which they want to save. The priority can be assigned on the basis of the importance of goals and urgency, the time available to meet them and the expectation of future income.
So, while retirement will always be more important than upgrading their car, the Jadhavs may decide that given the way their income is growing, they will set aside higher savings for retirement in the future and use a greater portion of their current savings to fund the family’s dream car. While prioritising, Manjari must ensure that the consumption goals are given priority only if the decision does not put the important goals at risk.
Another thing that Manjari can do is to break up a big and important goal into sub-goals. For example, funding their son’s graduation abroad may be the main goal, but they can identify a number of sub-goals, which will help reach the main objective. For instance, Manjari’s re-skilling to increase the family’s income and saving capability is a sub-goal. If this is achieved first, it will make it easier to meet the main one. However, while working on the sub-goals, the family must not lose sight of the primary goal.
Similarly, Manjari must set the time frame within which the sub-goals have to be met. Setting priorities, sequencing sub-goals that lead to a primary goal, and working towards them in a time-bound manner, reviewing and reworking priorities and goals as required are some of the things that will help the Jadhavs make their financial planning exercise more fulfilling.
The content on this page is courtesy Centre for Investment Education and Learning (CIEL).