5 Reasons Why your Goal Plan Is Failing (And What To Do About It!)
If you’re a goal-based saver, here are six things to watch out for to ensure that you stay firmly geared up for long term success
With the recent rise in Robo advisory platforms, we’ve witnessed a marked increase in the ‘goal orientation’ of investments, with a rising number of middle income individuals warming up to the concept of goal based financial planning, and subsequent goal linked investments. That said, there are many who began with good intentions, only to have their best laid plans fall by the wayside with the passage of time. If you’re a goal-based saver, here are six things to watch out for to ensure that you stay firmly geared up for long term success.
You’re saving too much
When it comes to goal based financial planning, saving too much can be just as detrimental as saving too little. If your monthly saving is in excess of 50% of your take home income, you may be stretching yourself too thing and cutting back on lifestyle expenses to the extent that you’ll quickly become disillusioned with the process. This may lead to erratic, ‘stop and start’ saving behaviour that’ll not serve you well in the long run. For best results, save what’s comfortable and build it up gradually as you go along. Consistency and discipline are key.
You’re fixated on traditional
Your past conditioning may be preventing you from looking beyond life insurance, PPF and fixed deposit type assets that provide capital guarantees and semi-fixed, linear returns. For long term goals, this is a bad idea because you’re essentially ending up killing most of the compounding benefits that can accrue over long periods and result in explosive wealth creation opportunities. Extricate yourself from the allure of guaranteed returns and look at equities as an option, for your long term financial goals that are more than 5 years away.
You don’t have a step-up plan in place
All right – so you started with what was comfortable on your pocket (as advised!), and now you intend to ‘increase your investments as and when its comfortable for you’. Bad news – that isn’t going to work. As the years roll by, your liabilities and financial pressures will increase simultaneously, and you’ll be up against the never-ending race to keep increasing your savings. For best results, have a very clearly defined step-up plan in place (say, in percentage terms over the past year’s outgo) and stick to it with all you’ve got!
You’re saving for everything at once
‘All I want it everything’ – does that describe you as a person? While your ambition is admirable, this attitude may end up becoming the scourge of your goal-based financial plan. When it comes to planning for your goals, remember – it’s a marathon, not a sprint! You need to plan, think ahead, prioritise and save for goals that matter the most to begin with, and then gradually add more goals as you go along. Saving for everything at once will just end up overwhelming you – and likely impacting your long-term commitment to your plan.
You’re going it alone
While there’s an element of cost-saving involved in cutting out an Advisor and going down the “DIY” path, we often find that this works out to be ‘penny wise, pound foolish’ in the long run. The support of a qualified, well-meaning Financial Advisor can prove to be critical for your goal planning success. Such an individual can hand hold you on your journey, ensure that you’re not fixated on short term market movements, and keep you aligned on your investment journey.