Financial Goal Setting
Note to: Clients of Yudhajit Financial Services
From: Yudhajit Baul
Date: 31-5-2021
Re: Financial Goal Setting
29th May is celebrated as the International Everest Day as this day in the year 1953 Mount Everest (8848 m) was first summited by Sir Edmund Hillary and Tenzing Nogray. The shuddering thought of climbing in the death zone that is beyond 8000 m, where a mountaineer can die due to hypoxia transmits shiver down one’s spine. Now one can imagine the level of preparation and training that goes in the backdrop for achieving such a daring feat. Negligence and arrogance in attitude and in preparation can be fatal. A mountaineer spends years preparing himself mentally, physically, financially and logistically to attempt summiting Mount Everest. The journey to summit Everest begins with an inspiration, visualisation, adequate preparation and if successfully completed ends in celebration. While it is quite easy to express so casually but accomplishing this monumental task needs immense determination.
Each one of you has your version of Mount Everest to summit in terms of achieving your crucial financial goals like children’s education in the University of your choice, leading a stress-free life post retirement, donating to a charitable foundation etcetera. If you have the determination to achieve your financial goals, you must have a financial plan in place. An overwhelming majority do not link financial goals with investment and fallaciously confuses investing with trading. The goal of such speculation with trading is short term thrill and not creating a corpus defined by a purpose, an objective and investment horizon. Failing to align your investment with a purpose, objective and investment horizon is like a ‘ship without a rudder’.
Financial plan is like the quintessential checklist a mountaineer must have before summiting similarly you must have your financial plan ready before attempting to achieve your financial goals, inadequacy in the preparation of the former leads to loss of life and in the latter leads to compromise in lifestyle. Let me illustrate my point with an example, if your current monthly expenditure is INR 100000, in 25 years at your retirement the current monthly expenditure will be inflated at 6% to INR 429186, assuming you turn 60 in 25 years you have to make a monthly provision for at least 25 years for that you would need a corpus of INR 8,40,93,019 (8.40 crores) at an expected return on investment of 12% CAGR. In order to create a monthly annuity pay-out of INR 429186 for 25 years to meet your expenses 25 years hence, you would need to invest INR 49402 monthly. Creating a financial plan followed by investing in a dynamic asset allocation portfolio defined by risk appetite, investment objective and time horizon would only help you achieve your financial goals, your version of summiting the Everest.