Last Updated on February 12, 2022 at 6:22 pm
Financial goals maybe arranged into three categories.
(a) Goals based on a one-time expense. Classic example is a marriage. You invest to create a corpus, which evaporates around the time of the wedding. Any event that is unlikely to occur again or occurs infrequently would fall in this category. For example, a child’s under-graduate and post-graduate education expenses, a business goal etc.
(b) Goals based on recurring expenses or any event that occurs with a well-established regularity. These could range from
- a holiday that you like to take every couple of years
- an expensive medical test that needs to be repeated often
- school/colleges fees
- insurance premium etc.
Among these, you may realise that
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- there are goals that are subject to inflationary increases each year (holidays, medical tests)
- there are goals that are subject to inflation but only change (often by a large amount) every few years. School or college fees is a good example of such goals.
- there are goals that do not depend on inflation, for example, term insurance premium.
Of course, there may be other factors that affect the expenses involved but those depend on circumstances and hence cannot be quantified.
(c) Retirement! In both the above categories, the corpus save is utilised in full when the need arises.
Retirement is a very different ball game. A retirement corpus must be capable of meeting the retiree’s expenses for each year in retirement. That is the expenses drawn from the corpus must match the inflationary increases. In order to do this the corpus must also be invested suitably. You can learn more about this here: How retirement calculators work
There are many resources available for goal-based investing at freefincal.
One-time financial goals may be planned with these goal planners
- Our flagship tool: Robo advisory template
- Another version of the goal planner is also available with this versatile SIP calculator
- Beginners may benefit from: A Step-By-Step Guide to Long Term Goal-Based Investing
- Advanced articles on goal-based investing are found here: Goal based Investing: 4-part series
I would like to add a recurring financial goals calculator to this collection.
- You can use this for goals that repeat with any frequency: once a year, once in 2/3/4/5 … years.
- Two recurring goals can be calculated.
- The results are tabulated in a single cash flow chart.
This is now incorporated into our robo advisory tool
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Dr. M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter, Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
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