New Year 2023: Set your financial goals for the coming year in 6 easy steps – Experts explain

New Year 2023: As we are about to enter a new year in a week, many of us are thinking of a new year resolution for 2023. And for some, defining the financial goals for 2023 is one of them. 

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What are financial goals? 

Firstly, we need to be clear about what it means to have a financial goal. According to Ulhas Joshi, Head-Sales, Samco Mutual fund Business, financial goals are financial milestones that a person sets out to achieve. 

According to Amar Ranu, Head- Investment products & Advisory, Anand Rathi Shares & Stock Brokers, different people may have different objectives, such as paying off debts or loans, going on a vacation, or retirement.

How to craft financial goals in 6 simple steps:

1. List down all the goals 

According to Joshi, to craft a financial goal — a person should list down what they want to achieve and then set priorities and timelines. 

So, the first step is to list down all the financial goals that one wants to achieve in 2023. The goal can be anything from buying a house to getting certain returns from equity and debt instruments. 

2. Categorise your goals 

The next step is to categorise the financial goals into short term, medium term and long-term goals. 

According to Ranu, a short-term goal is of more than a year, medium term is of 3 to 5 years and a long-term goal is of 5 years and more. 

To put things into perspective, if an investor wants to buy a car in 2 years, then that would come under short term goal. And buying a house in 10 years would come under long-term.

3. Measure the goals

According to Ulhas, one who is setting the goals needs to critically analyse what their incomes and expenses are and map them to individual goals as per their priorities.

Decide on the time period and amount one needs to achieve the financial goal. For example, if one’s goal is to buy a car, then they need to decide the basic features they need in that car and the estimate of the cost of the car, and in how many years they want to buy it in. This will help in narrowing down the goal and will make it easier to know what is the next step. 

4. Emergency Funds 

Before jumping into achieving financial goals, one must see to it that they have an emergency fund for a rainy day as well. 

Ideally, creating an emergency fund and having adequate insurance coverage should be everyone's first goal. 

An emergency fund refers to money kept away that one can use in times of financial distress.

5. Deadline

Setting a goal is only successful if one achieves it and procrastination will never help in achieving the goal. A deadline will help individuals to keep pushing towards the end goals. These deadlines can be divided in smaller chunks which would be easier to achieve and give sense of achievement upon successful completion.

According to Ranu, one must set a specific budget for each goal. That is, break down the set budget into smaller amounts. For example, if one’s budget for a car is Rs 6 lakhs, then they can divide it into 20 monthly savings of Rs 30 thousand each.

6. Revise the goals

There may be times when an individual’s priority may change due to any unforeseen event. In that case, it is necessary to revisit the previously set financial goals. By revisiting their goals one can reassess the targets as per the situation. 

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Points To Remember while crafting a Financial Goal:

According to Joshi, individuals need to make a clear assessment of their needs when crafting their goals and evaluate the steps they want to take in order to achieve it.

Points to remember by Samco Mutual Fund Business:

1 Critically examine actual income and expenses before setting goals. This will help one’s goals be realistic. 

2 Evaluate progress at least every quarter. 

3 Analyse risk appetite when choosing instruments to invest in.

4 One can expect volatility from many quarters like changing interest rates to stock market corrections. Plan accordingly.

As per Ranu, investors can concentrate on setting incremental goals — that is, categorising goals based on difficulty. It entails beginning with the easiest goals and progressing to more difficult ones.

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