Financial Planning to Meet Your Future Goals

All of us do some bit of planning to manage our income, savings, expenses, future liabilities (money we expect to spend in the future) whether we understand anything about financial planning or not. While we may be managing it well for now, it may not be the best way to do or it may not give us the best results. While financial planning may sound technical, all it means is how do you recognize your future earnings and liabilities today, list down your current earnings and expenses, see if there is shortfall between what you’ll need in the future and what can get to with current means and then plan your savings and investments to overcome that shortfall.

List Current Income & Expenses:

Start with your current income which should include your salary, salary of other working members in the family, any other income like rent, business income etc. Add it all up and remember to also deduct the taxes you’ll pay on each of the income to finally arrive at the net income for your family at present.

After having arrived at your family’s net income, deduct all expenses like household expenses for the year, tuition fees, loan EMIs or any other short-term liabilities (expected within next 3-5yrs) you foresee like renovating the house or a medical treatment etc. Post this deduction what you now get is the savings you have that you need to invest wisely for the future.

Setting Future Life Goals

The next step in financial planning should be putting down all your future financial liabilities, the time when they will arise, the amount you will need etc.

Goal 1: For instance, if you are a 40 yr old man and expect your daughter’s college education to be due after another 8 yrs and anticipate this may cost around 30 lakhs then, will you have the money to finance it? Decide on an investment and the amount that you need to make today to achieve this goal 8 yrs later.

Goal 2: Similarly, if you intend to retire at 60 yrs, you need say 1 lakh p.m to maintain your current lifestyle which is INR 50,000 in today’s value. Given the advances in healthcare, you can easily expect a 25-30 year long retired life. The money you need to live your retired life can be funded by a long-term low risk investment (like debt mutual funds, pension plans) made today. Set aside some money for such an investment to be made today.

Goal 3: You may set aside money for buying some health insurance that you’ll need during your retired phase or even earlier. The insurance premium needs to be funded from your current savings.

The goal setting process helps in understanding your future requirements, quantifying them and making investments in the right asset class to fund each of the goals when they become due.

Asset Allocation:

While asset allocation can be done along with goal setting, it is better to understand how asset allocation can impact the success of your financial plan. You can invest your savings in various asset classes like equity, debt, gold, real estate etc. Look at the investments you have already made like if you own a PPF or EPF account, money you have invested in bank FDs, home loans you are paying etc. From the current savings and investments, you have already made, calculate the percentage of allocation made to each asset class. For instance, all bank FDs, PF amounts, govt bonds, debt-oriented pension plans should be classified as debt. Any money invested in IPOs, company stocks, equity mutual funds should be classified as equity, loan EMIs should be classified as real estate etc.

As a thumb rule, 100 minus your current age should be allocated to equities and equity like product. If you are 40 yrs old, 60% of annual savings should be invested in equity like products and the balance in debt products. If your current investments don’t seem to reflect this, try balancing your investments by reducing the money you put in debt products like FDs and bonds and divert that money towards equity mutual funds or stocks.

Most people are not comfortable investing in stocks as it requires special research, constant monitoring and a lot of undue stress. Hence equity mutual funds are a better option since your money is professionally managed by fund managers who do all the research on companies before investing and continuously monitor the performance of the fund by buying good stocks and selling underperforming stocks.

Start Early

You must start your financial planning early because this will give you the advantage of compounding example whichever option you choose to invest in, your money will get to grow for longer duration with returns compounded every year.

Annual Review & Rebalancing

While a sound financial plan is a good starting point, following it with discipline and rebalancing your portfolio every year is very important. Since life circumstances change frequently, you must relook at your plan along with your financial advisor and make changes to reflect your new circumstances.

Rules to Setting Business Goals and Objectives: Why and How to be SMART

We all know that nothing runs without a plan, and a plan cannot run without having its objectives set.

That applies to any kind of plan, whether we’re talking business or personal finances, university degrees or NGO programs, website promotion or weight loss.

Setting objectives and milestones is of crucial importance for any planning activity and is the core of its success, or failure.

Knowing how to set objectives is not exactly rocket science in terms of complexity, but any strategist should know the basic rules of how to formulate and propose objectives. We will see in this article why objectives play such a major role within a company’s planning and strategic activities, how they influence all business processes, and we will review some guidelines of setting objectives.

The Importance of Setting Objectives

One might wonder why we need to establish objectives in the first place, why not let the company or a specific activity just run smoothly into the future and see where it gets. That would be the case only if we really do not care whether the activity in discussion will be successful or not: but then, to use a popular saying, “if something deserves to be performed, then it deserves to be performed well”. In other words, if we don’t care for the results, we should not proceed with the action at all.

Setting objectives before taking any action is the only right thing to do, for several reasons:

– it gives a target to aim to, therefore all actions and efforts will be focused on attaining the objective instead of being inefficiently used;

– gives participants a sense of direction, a glimpse of where they’re going to;

– motivates the leaders and their teams, since it is quite the custom of establishing some sort of reward once the team successfully completed a project;

– offers the support in evaluating the success of an action or project.

The 5 Rules of Setting Objectives: Be SMART!

I am sure most managers and leaders know what SMART stands for, well, at least when it comes of establishing objectives. However, I have seen some of them who cannot fully explain the five characteristics of a good-established objective – things are somehow blurry and confused in their minds. Since they can’t explain in details what SMART objectives really are, it is highly doubtful that they will always be able to formulate such objectives.

It is still unclear from where the confusion comes: perhaps there are too many sources of information, each of them with a slightly different approach upon what a SMART objective really is; or perhaps most people only briefly “heard” about it and they never get to reach the substance behind the packaging.

Either way, let us try to uncover the meaning of the SMART acronym and see how we can formulate efficient objectives.

SMART illustrates the 5 characteristics of an efficient objective; it stands for Specific – Measurable – Attainable – Relevant – Timely.

1. Be SPECIFIC!

When it comes of business planning, “specific” illustrates a situation that is easily identified and understood. It is usually linked to some mathematical determinant that imprints a specific character to a given action: most common determinants are numbers, ratios and fractions, percentages, frequencies. In this case, being “specific” means being “precise”.

Example: when you tell your team “I need this report in several copies”, you did not provide the team with a specific instruction. It is unclear what the determinant “several” means: for some it can be three, for some can be a hundred. A much better instruction would sound like “I need this report in 5 copies” – your team will know exactly what you expect and will have less chances to fail in delivering the desired result.

2. Be MEASURABLE!

When we say that an objective, a goal, must be measurable, we mean there is a stringent need to have the possibility to measure, to track the action(s) associated with the given objective.

We must set up a distinct system or establish clear procedures of how the actions will be monitored, measured and recorded. If an objective and the actions pertaining to it cannot be quantified, it is most likely that the objective is wrongly formulated and we should reconsider it.

Example: “our business must grow” is an obscure, non-measurable objective. What exactly should we measure in order to find out if the objective was met? But if we change it to “our business must grow in sales volume with 20%”, we’ve got one measurable objective: the measure being the percentage sales rise from present moment to the given moment in the future. We can calculate this very easy, based on the recorded sales figures.

3. Be ATTAINABLE!

Some use the term “achievable” instead of “attainable”, which you will see it is merely a synonym and we should not get stuck in analyzing which one is correct. Both are.

It is understood that each leader will want his company / unit to give outstanding performances; this is the spirit of competition and such thinking is much needed. However, when setting objectives, one should deeply analyze first the factors determining the success or failure of these objectives. Think of your team, of your capacities, of motivation: are they sufficient in order for the objectives to be met? Do you have the means and capabilities to achieve them?

Think it through and be honest and realistic to yourself: are you really capable of attaining the goals you’ve set or are you most likely headed to disappointment? Always set objectives that have a fair chance to be met: of course, they don’t need to be “easily” attained, you’re entitled to set difficult ones as long as they’re realistic and not futile.

Example: you own a newborn movers company and you set the objective of “becoming no. 1 movers within the state”. The problem is you only have 3 trucks available, while all your competitors have 10 and up. Your goal is not attainable; try instead a more realistic one, such as “reaching the Top 5 fastest growing movers company in the state”.

4. Be RELEVANT!

This notion is a little more difficult to be perceived in its full meaning; therefore we will start explaining it by using an example in the first place.

Imagine yourself going to the IT department and telling them they need to increase the profit to revenue ratio by 5%. They will probably look at you in astonishment and mumble something undistinguished about managers and the way they mess up with people’s minds.

Can you tell what is wrong with the objective above? Of course! The IT department has no idea what you were talking about and there’s nothing they can do about it – their job is to develop and maintain your computerized infrastructure, not to understand your economic speech. What you can do it setting an objective that the IT department can have an impact upon, and which will eventually lead to the increase you wanted in the first place. What about asking them to reduce expenditures for hardware and software by 10% monthly and be more cautious with the consumables within their department by not exceeding the allocated budget? They will surely understand what they need to do because the objective is relevant for their group.

Therefore, the quality of an objective to be “relevant” refers to setting appropriate objectives for a given individual or team: you need to think if they can truly do something about it or is it irrelevant for the job they perform.

5. Be TIMELY!

No much to discuss about this aspect, since it is probably the easiest to be understood and applied.

Any usable and performable objective must have a clear timeframe of when it should start and/or when it should end. Without having a timeframe specified, it is practically impossible to say if the objective is met or not.

For example, if you just say “we need to raise profit by 500000 units”, you will never be able to tell if the objective was achieved or not, one can always say “well, we’ll do it next year”. Instead, if you say “we need to raise profit by 500000 units within 6 months from now”, anyone can see in 6 months if the goal was attained or not. Without a clear, distinct timeframe, no objective is any good.

What Are SMART Goals?

Each year many work teams set goals for the coming year and leadership teams determine their objectives for their organizations. During the goal and objective setting process, the term SMART goal is often used without much thought as to what it may mean as an overall working plan. SMART goals are a way to not only decide what to do, but how to do it in a way that can easily be tracked to determine whether or not progress is made and know when the goals are met. In this type of goal, the acronym in SMART stands for: Specific, Measurable, Attainable, Relevant, and Time-based.

Specific describes the details of what is to be accomplished in a clear and simple way. The goal must be easy to understand and well defined in order to make achieving it possible. Unclear goals are easily misunderstood and therefore typically do not accomplish the desired results. Being specific answers the question of what has to be done so that appropriate actions can be taken.

Measurable uses quantifiable terms in order to compare where the goal is in reaching the desired target. Establishing performance criteria for measuring the goal will allow for changes during the goal period in order to manage the process and stay on track to meeting the target. Utilizing a definite tracking method shows how much will be gained by accomplishing the goal and encourages continued improvement.

Attainable means the goal is within the ability and capability of those involved while stretching their collective talents to reach the most desirable target. It means that the defined goal is both possible and realistic while still being challenging for the organization and its people. Having a goal that stretches people and allows for growth opportunity often leads to very worthwhile business results.

Relevant indicates the goal is not only within reach of skill levels but also has meaning and relates directly to the purpose or vision of those who are responsible for meeting the goal. Relevancy means everyone involved can understand how they influence the goal and how it affects them. When a goal is relevant to those involved it increases commitment and makes meeting the goal a highly motivational tool.

Time-based defines a period for meeting the measurements in the goal or a deadline date for accomplishing the overall target goal. Having a time frame established allows a frequency for monitoring progress, staying on track, making adjustments to meet the overall goal, and gaining momentum with each accomplishment along the goal path. Without a time-based element to the goal, it will be impossible to make a targeted plan.

Use the acronym SMART to establish goals that are: Specific, Measurable, Attainable, Relevant, and Time-based. SMART goals may be used as an effective way to decide what to do in the coming year and where to make changes if the tracked goals are not progressing as desired. During the yearly goal or objective setting process, be sure to use the SMART goal definition when working on a plan for the future of a team or organization.

MDG and 2020 Goals – Nigeria’s Hidden Potential

This is an excerpt of UNDP comments on Nigeria on the progress of its Millennium Development Goals following a 2006 status report. Of the eight goals, UNDP foresaw only the achievement of universal primary education, environmental sustainability and global development partnerships. UNDP, which is official monitor of the UN declaration, goes on to say that availability of current data and limited funding for further data generation are critical barriers in the programme. Bad news for a country that has more that just the MDGs to meet!

Former president OJ Obsanjo initiated the ambitious 2020 plan – of taking Nigeria to the top 20 world economies by that year – after being democratically elected to power in 1999 following decades of political uncertainty and civil unrest. If the MDG targets are hard, considering both Nigeria’s current and projected fortunes, the 2020 goals are much tougher.

The extreme contradictions of Nigeria’s economy are part of academic lore. The second largest economy in the African continent earns an estimated $2.2 million every day from oil exports alone, yet its GDP per capita at just over $1,400 is comparable to some of the poorest nations. As of 2007, it has proven reserves of over 36 billion barrels in oil and 5 trillion cubic meters of natural gas, yet more than 54% of its population continues to live in extreme poverty without access to fundamental necessities. Added to these are far less than optimistic human development indices and the latest threat of growing Islamic militancy in the Niger Delta region.

The MDGs that Nigeria is unlikely to achieve, according to the UNDP, are:

* Eradicating extreme hunger and poverty
* Promoting gender equality and empowering women
* Reducing child mortality
* Improving maternal health
* Combating HIV/AIDS, malaria and other diseases

The goals are part of the UN Millennial Declaration of 2000 that sets out to achieve universal basic human rights concerning health, education, shelter and security in a time bound manner by 2015. They call for genuine progress and reflect holistic development from the bottom up. For Nigeria, they present gargantuan challenges in terms of innovative strategy and effective execution.

At the very basic level, Nigeria’s goals presume a paradigm shift and large-scale overhaul of its legal, financial, energy and educational institutions. This will require overriding commitment on two critical aspects: effecting a mindset change at the grassroots level and working out radical policy changes for accountability and effective implementation. For a country riddled with ingrained corruption and administrative ineptitude, these can be defeating challenges.

For Nigeria to have a realistic shot at meeting its twin objectives, history holds the strongest argument in favour of entrepreneurship development. Enterprises have been the backbone of rapid but durable economic growth the world over, starting with the UK in the ’70s and spreading across to US, Europe and large sections of Asia. Entrepreneurship is a cornerstone for economies that have triumphed by successfully capitalising on their natural and human resources. For a country like Nigeria, richly endowed in both land and people, it offers the unmistakable opportunity of viable accelerated development.

In the context of its goals, entrepreneurship development also offers Nigeria a chance at turning weakness into strength. Africa’s most populous nation with a headcount of 148 million is a latent powerhouse in terms of the workforce necessary to take its economy into overdrive. Rural Nigeria in fact has uncharted capacity in terms of small and medium enterprise development, together with massive agriculture potential due to its tropical climate. Earlier this year, the government actually admitted that over 90% of all new jobs in the country were being accounted for by the informal economy.

Nigeria’s mammoth unorganised sector is its veritable backbone and makes up, according to some estimates, as much as 65% of the formal economy. A plethora of activities in this sector has been the traditional provider of incomes and livelihoods to much of Nigeria’s poverty-ridden population. Successive decades of non-inclusive growth have left this vast majority fending for itself and surviving on cottage-level, backyard employment in small-scale enterprises. Over the years, this economy has multiplied in both scope and dynamism, and currently provides 80% of rural employment opportunities and 60% of all urban jobs. The crux of the matter is that Nigeria has an available and sizeable manpower that has hands-on entrepreneurial experience and is ready to be mobilised in government-guided venture schemes. This is a substantial, if hidden potential for the country.

Historically, the bulk of Nigeria’s current economic problems grew out of a traditional over-dependence on the oil industry to the detriment of almost all other sectors. The reforms process initiated after 1999 focussed on undoing this and achieved a healthy 7% growth rate in the non-oil sector between 2003 and 2006, comparable to average growth rates for the entire economy. Further, Abuja initiated first steps in the right direction by deregulating oil prices, disinvesting oil refining and marketing entities and successfully negotiating with the London and Paris clubs for conditional waiver of outstanding debts. The Virtual Poverty Fund was initiated soon after the debt relief in 2005 to divert finances toward poverty eradication. Nigeria has been allocating an estimated $1 billion annually to support revamp operations in health, education, sanitation and energy and related sectors since 20062. Additional legislative measures have been brought about to promote micro-financing and the growth of micro, small and medium enterprises (MSMEs).

Significant progress has been made the world over in achieving many of the Millennium Goals. According to UN data, average global incomes rose by 21% in the decade since 19003. Positive figures are also being reported in the areas of child mortality, life expectancy and access to drinking water, together with a fall of over 130 million in the number of people living in extreme poverty for the same period. However, the progress has been far from uniform and sub-Saharan Africa remains the acknowledged epicentre of the crisis. Due to its sizeable economy and population, as also its strategic influences, Nigerian progress in the MDS and 2020 goals are often reflective of the entire region.

Practical lessons come from Asia, which has seen rapid and significant development despite problems that are fundamentally not unlike Nigeria’s. An especial reason behind this variable difference in progress is the difference between policy and execution. Beyond a dedicated commitment to achieve its targets, Nigeria faces the ubiquitous challenge of effective implementation of its reform and regulation measures.

In 2007, the IMF listed Nigeria 41st in its ranking of global economies, based on a combination of indicators including GDP, Gross National Product and per capita income. Meeting both its MDG and 2020 goals will require Nigeria to compete against economic powerhouses like the US, Japan, Germany, China and the UK. Clearly, how it fares in the final analysis will depend as much on the intensity of its efforts, as on the amount of innovation and ingenuity it brings to the process.

The Six Fundamental Business Goals and Objectives Necessary For Success

There are six fundamental business goals and objectives necessary for success. The first thing you need to be aware of is that any online business or conventional business needs Six fundamentals to exist to be ultimately successful:

    • A product or service that provides a solution to a problem or a physical or emotional benefit (obviously important);
    • Demand – If there is not an existing demand, you are fighting a losing battle;
    • Traffic – a steady flow of prospects that eventually become customers;
    • Real estate – a location to conduct business (internet url, storefront, street corner, etc.);
    • An element of uniqueness or personality (if you are selling the exact same thing in the exact same way as everyone else, it will be very difficult to be successful for very long).
    • A mastermind team of two or more individuals with a common goal for the business. This does not necessarily mean you have to have employees or a partnership business. Joint venture partners or affiliate partners, where there is a mutual benefit for the growth your business can generate enormous success

    The first two fundamentals, product and demand are obvious because no one will even bring out their wallet or purse if you are not providing them with a benefit (short of robbery or charity). Likewise, you would have to engage in strong arm (robbery) or government tactics to create a demand where there is none.

    Again, the next two factors are an obvious necessity that speak for themselves.

    Business factors 5 and six however, are the most overlooked fundamentals of any business.

    Even major corporations go bankrupt because they misunderstand the last two factors on the list that do not seem as important. However, I will give a couple of examples as to why the last two basic success principles, can outweigh the more prominently known business needs.

    Most start up businesses fail, not because they are missing out on a product that is in demand or a good location where potential customers exist. Businesses usually fail when the owner does not have the support network or team necessary to handle growth and they become overwhelmed with all of the small details of running a business, and they give up because the cost to their health, marriage or happiness outweighs the reward.

    Another major cause of business failure comes when a business owner mistakenly tries to copy the business model of a larger company that is failing in that niche market. Large companies will often buy out small potential competitors to prevent future competition and then spend huge sums of money to prop up the business for appearance sake for the larger company, when the market does not justify the investment. Then, when others think there is huge profit based on the outward false impression, they want to jump on the band wagon only for profit motives without doing their own market research.

    It is very important to create your own unique identity in whatever business you are in. It is also important to remember that your success relies on your ability to serve your customer, not the other way around.

    Many years ago, when I had an hourly job and used to buy beer after work to relax with, there was a liquor store within a block of where I worked. It was a large store that had many investors. They spent a lot of money on advertising and employees and always had some kind of sale going on to attract more traffic. They also had the best location imaginable at the main intersection of the two highways coming through town. Their closest competitor was a tiny place one the edge of town.

    From the first time I went to the store, the manager seemed somewhat arrogant. As it turned out, he was more than that. One day they were out of the kind of beer that I liked and I asked if there was some in the back. His reply was unbelievable. He said,”If it’s not in the cooler we don’t have it. It’s not like we stock up on that kind of (expletive) beer.

    I felt insulted, because the beer I was requesting was an inexpensive brand and he made it sound as though my needs or desires were less important than someone who spent more money. That is not a good idea if you want to keep a customer. Needless to say, I did not go back for awhile. The next time I did go back, he made sure he eliminated any future desire I might have of returning. When I asked him for a sack for the beer, he replied, “what’s wrong with the handle on the 12 pack?”

    I have never been back to that business and the friendly little store on the edge of town has a full parking lot at times. I wonder why. The only other time I have come across a business that seemed to try to eliminate future business, was from a manager at a chicken franchise restaurant that had a 1/2 price sale on specific dinners right on the front of the store. I ordered one of those dinners and was charged full price. I asked him to correct the billing and he told me he could not because he had entered it into the register as a dinner and it was my fault for not asking for the ‘special’ so he could push the right button. Now he can not change it or it will screw up his books. He refused to give me my change and I filed a complaint with his corporate office. I have no idea if he is still there because I will not go back.

    I do not understand what the goals of these two managers were, however, I am quite sure they are not in tune with the investors in those companies. That kind of scenario is as undesirable to a business owner or investor as an uncooperative spouse who has no regard for the business, but demands access to the bank accounts. It is a recipe for failure.

    It is better to have a competitor as part of your mastermind team, when possible, to work as a team to generate business for both companies and share in the rewards. That scenario is always more profitable than competition from within tearing each other down. Competitive internet businesses commonly take turns promoting each others products as joint venture partners, benefiting both businesses far more than they would benefit on their own.

    It is also extremely important if you are starting out, to find a mentor who is established in the business arena you are wanting to go into. Their experience and insight can literally save you years of trial and error, and if you can create a business that is mutually beneficial, the sky is the limit to your success.

    It seems obvious to an outside observer that the success of a business would rely on it’s ability to stand out from the crowd and be unique in serving it’s customers. However, in today’s franchise society, where big corporations have thousands of exact duplicate small businesses owned by different franchisees, small business owners and investors often mistakenly look at these large entities as an example to follow, when in fact, many of these franchise giants are crumbling under their own weight.

    One of the biggest problems large corporations face today, is that they have become so diversified within themselves, as they were buying out competitors, in order to own various market shares, they no longer have the mastermind team that originally brought them to this point of business success.

    If they have diversified to much from the original goal as they grew, they begin to compete with themselves within the company. As a result, in order to show profitability in one branch of the company, a middle executive must be in competition with an executive in another branch of the company in order to thrive and continue to get investors to loan to his branch of the company. This kind of competition can be damaging, if the bureaucracy and diversification is to large.

    In today’s marketplace, huge corporations are straddled with debt, have huge bureaucracies, and only seem to be in business for the profit and the investor. The time is right and the low hanging fruit is there if you want to create a business with the customer in mind.

    By Brian Fowler

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