How to Define Your Financial Needs and Track Them Regularly

More people should learn to tell their dollars where to go instead of asking where they went. – Roger Babson (American entrepreneur and economist)

Achieving financial security today requires more than just a savings account. It is a matter of careful planning and conscious decision-making to ensure you build a sufficient corpus for your future and dreams. Babson’s advice reflects the heart of goal setting: being intentional with every rupee.

A clear financial goal helps you visualize how much you need to save and grow to achieve your dreams. Together with proper planning and investment strategies, this is the right recipe for financial success.

Let’s define financial goals and understand how to set financial goals that help you live your dreams and establish a corpus for the golden years of your life.

SMART Framework Explained

SMART financial goals help you with personal finance planning based on these five pillars:

• Specific objectives to achieve with your financial planning.

• Measurable steps, savings, or investments to guide further strategies.

• Achievable milestones that don’t stretch you too thin.

• Relevant goals that align with your future ambitions and plans.

• Time-bound yardsticks so that your plan stays actionable and current.

• Let’s understand this approach in more detail.
  

Specific Objectives

Establish clear and well-defined financial goals instead of vague ideas like: “I want to save money in the next year.” Add specifics to your goal so that you can visualize them. For example, specific objectives look like this: “I want to save ₹5 lakh in the next three years towards buying a new car.”

Measurable Steps

To track your progress, it is important to quantify your goals so that you know you have reached a milestone when you achieve them. This helps you stay motivated on your financial journey.

For example, segment your savings or investment goals into bite-sized actions. To save ₹5 lakh in the next three years, you should save ₹166,670 each year. For this, you will need to put away ₹13,889 each month.

Achievable Milestones

Make sure to set realistic goals and consider your current financial requirements. For example, to save ₹13,899 monthly, you will first need to account for rent, utilities, fees, and other expenses.

Relevant Goals

Your goals should matter to you and provide for your dreams in the future. For example, if you plan to get married in the next two years, saving for a house is more relevant than saving for a vacation.

Time-Bound Yardsticks

Your goals should have a deadline for them to be meaningful. For example, you can have deadlines like “I will save ₹70,000 in five months to reach my goal of saving ₹166,670 each year.”

Examples of Financial Goals

Personal financial planning does not necessarily need to be long-term or for your retirement. There are different kinds of financial goals you can have:

Short-Term Goals

Here is how to apply the SMART approach to financial goals for the next 3 years:

Building an emergency fund

• Specific: Set a goal to save ₹1 lakh for emergencies.

• Measurable: Realise monthly savings of at least ₹8,000 to achieve this goal in 12 months.

• Achievable: Adjust your spending and splurging to ensure that you save ₹8,000 monthly.

• Relevant: Ensure that the amount you set aside accounts for the medical expenses you commonly incur.

• Time-bound: Achieve this goal within 12-13 months.
  

Long-Term Goals

Use the SMART approach to reach your long-term goals:

Saving for retirement

• Specific: Accumulate ₹2 crore in savings.

• Measurable: Invest at least ₹20,000 in a diversified portfolio with a minimum annual return of 8%.

• Achievable: Review your budget regularly and have a financial advisor rebalance your portfolio every 6 months.

• Relevant: Retirement funds should account for inflation and expenditure post-retirement.

• Time-bound: Achieve this goal by the time you are 60 years old.
  

Knowing that your financial goals can evolve or change over time is essential. For example, as your financial situation stabilizes, your short-term goals may transition into long-term planning.

Or, your long-term goals may expand to include more activities or freedom. Life changes like switching careers or relocating can reshape your financial goals.

Tools to Track Goals

Today, many digital tools and apps are available to help you track your financial goals regularly. All you need to do is provide basic data to the tools while they manage all the calculations:

Personal Finance Planning Apps

Apps like Mint, You Need a Budget (YNAB), and PocketGuard offer easy features like expense tracking, budget planning, and goal monitoring to help you start with SMART financial goals.

They can provide real-time insights into your financial status and health to visualize where your money is going. For example, YNAB helps with proactive budgeting by assigning every rupee to a job, while Mint consolidates your accounts in one place for management.

Excel Templates for SMART Financial Goals

If you want to create a budget, consider using Excel and Google Sheets. You can find diverse templates for income, expenses, and savings tracking in either application. With built-in custom formulas, graphs, and tables, you can convert data into manageable visual graphics that speak your language regarding spending or savings. 

For example, you can create a sheet to track monthly contributions to your savings goals.

Advisor Consultations for Personal Finance Planning

Working with a financial advisor helps you get personalized guidance and diversified, balanced portfolios. Advisors analyze your current financial situation and help you set realistic goals. They review your progress periodically and offer suggestions to improve your plans.

You can also use a combination of tools to suit your financial plans. For example, you can integrate your budget apps with spreadsheets to automate data entry.

You can use shared apps with your financial advisors to gain expert insights on your habits. You can use apps for dynamic updates while dedicating Excel to what-if scenarios that also help you plan for contingencies.

Final Words

True independence comes from financial security, and financial security comes with informed planning. Financial goal setting for beginners can be a little confusing, but using the SMART approach can ease into a saving habit and evolve it as your needs change.

The key things to remember when defining your financial needs are your goals for the future, the duration of savings, and your saving capacity after accounting for all lifestyle expenditures.

At AssetPlus, we simplify this journey for you. With a 100% digital platform, tools to track and manage investments, and access to a wide range of mutual funds and financial products, you can define, plan, and achieve your financial goals confidently. Start planning smarter with AssetPlus today!