Traveling in many ways is the perfect analogy for each of our financial journeys. And given how much everyone loves to travel this podcast should be easy for all of you to relate to.
So what are some of the things that come to your mind when you think about a vacation?
Firstly, you think about where you want to go. If it’s a place that has been on your bucket list for quite a while, the level of excitement seems to go up a notch. Next come the 2 other important aspects of the trip – when you want to go and what is your budget.
The answers to these questions are critical because it helps understand various other factors like what the accommodation rates and ticket prices might be. And also, how much you need to save up by then.
So, now that we have figured out that where, when, and how much are the 3 important factors while planning your vacation, let’s look at how similar this is when it comes to your financial journey.
The ‘where’ part or the destination, is the main financial objective. You could choose any destination you want, but having one is the most important part. It gives us a sense of direction and helps plan the other aspects of your travel. Likewise, in financial journeys knowing what your goals are is crucial.
Then comes the when part. Just like your vacations, the timeline to meet your goals is also very important. The more time, the easier it is for you to save up and meet the target. Starting early, allows you to gradually save up the money.
And finally, we come to how much your budget is. Depending on the destination and time you have, you work on a budget for your vacation. This helps plan the finer details like what attractions you want to visit, where you want to stay, what kind of shopping budget you need to keep aside, and so on. Similarly, setting a target corpus fora goal is very important. This will layout the course of action.
So, to put it in perspective, let’s say your goal is to buy a house. It’s important to qualify the goal by applying the 3 principles we talked about. This could be done by specifying that you want to buy a 3 bedroom apartment, by 2025 for about 1.25 Crores. It’s easy to notice that this paints a much clearer picture that charts out how you must channel your savings buying the house. With a clear action plan, you can also measure progress periodically.
Thus, as we travel through the journey of life, it is important to set goals, create milestones, and work in a systematic way towards wealth creation goals.