Achieving Financial Goals Made Easier With Proper Planning

Starting to invest at an early stage helps you build a strong foundation for your healthy financial future. This is because you get the benefit of longer investment horizon and also the power of compounding comes into play. However, in case you have not done that till now, just remember what Warren Buffett once said, "The best time to start investing was 20 years back, the second best time is right now."

Achieving Financial Goals Made Easier With Proper Planning 
-Sanjeev Dayal Founder, SIDA Consultants



The first step in starting your investing journey is to devise a clear financial plan. A sound financial plan must list down all your financial goals, the expected amount required to achieve each of those goals and the time when one must achieve those goals. More importantly, you must make every attempt to quantify your goal and the time horizon required. These data points forms the basis of asset allocation decisions required for building an investment portfolio.

Arvind Sinha, aged 55 years, had nothing in terms of earmarked financial savings and investments towards his financial goals. In search of finding a guiding partner in his financial journey, he got in touch with SIDA Consultants to help him formulate a sound financial plan to achieve his goals.

Even in terms of financial goals, his desires were quite limited and were confined to better education for his children and a comfortable life post-retirement. Post determination of his goals, it was time for quantifying these goals. The present cost of the graduation course in a good college for both his children, Archit and Ananya, is Rs. 10 lakh. However, this cost is likely to be incurred eight years later; hence taking into consideration the inflation element, the required amount is likely to be around Rs. 16 lakh. Similarly, in case of retirement planning, which is 20 years later, the estimated corpus amount comes to Rs. 7.36 crore.

While this was certainly a big task at first thought, given that there is no existing savings to cushion the goals, what needs to be remembered is that small drops of water make an ocean. In a similar manner, regular and consistent savings help you accumulate a healthy amount over a period of time

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Arvind's financial profile was not much encouraging in terms of existing savings. We had to prepare a fresh financial plan to chalk out the road towards achieving his financial goals. Further, we had to ensure that reasonable estimates are taken into account, such that his financial goals are achieved within the given time frame, said, Sanjeev Dayal, Founder, SIDA Consultants.

Since the major part of the financial goal was towards retirement planning, the investment horizon had to be considered as long-term. Accordingly, a major part of the investment portfolio was allocated towards mid-cap and small-cap funds. However, it was planned that as the goal nears achievement, the corpus will be shifted to conservative funds in order to preserve existing returns for the portfolio. 

Sanjeev Dayal, guided Arvind towards investing periodically through Systematic Investment Plan (SIPs), investing lump sum may not be possible all the time since sparing a big amount in one shot is a difficult task. Investing through SIP helps you to follow a disciplined approach towards achieving your goals. Further, since the investments happen over a period of time, short-term volatility in the equity markets is also taken care of. We offered both the options to Arvind; investing systematically or through lump sum. Investing in lump sum was certainly a difficult choice to be made as, given his financial goals, it called for an investment of around Rs. 69 lakh. On the other hand, if he opted for SIPs, he could have achieved the same goal by investing Rs. 85,000 per month, noted Sanjeev Dayal. 

In line with expectation, Arvind opted for regular investments through SIPs. A long-term investment horizon allowed sufficient time for his investments to grow and bear the intended fruits. Even if the retirement corpus requirement seemed like a big amount on the day of planning, regular savings coupled with reasonable longer time frame of investment will help Arvind reach his goals well in time and live a comfortable postretirement life.

Sanjeev Dayal, Founder, SIDA Consultants, Info@sidaconsultant.com