Before creating a financial planning, a financial adviser must ask exactly what is financial goals. With your financial goals the adviser will create your financial planning. Surely the financial goals will affect the financial plannings. Without the goals, you cannot construct the financial planning. Like driving a car, you should know where you are gonna go. A driver must be confused if they should drive without any destination. Having been told the destination, the driver may need the map or a plan to arrive at the destination.
How the goals affect the financial planning:
1. The financial goals will affect the budget that will create. If we want the expensive house but we have little money, we have to make a tight budget. Our priority is to save much money for the expensive house. We may slash some spending for the house or we may find other money for the house. The adviser will suggest us to find more money from other sources.
2. The goals also encorage you to save more money bit by bit. We realize that the our goals is so difficult to reach. The rule of thumb of saving is ten percent of the income. The financial planning may order you to increase the percentage of saving if you have so many financial goals.
The percentage of saving to the income will influence your lifestyle because you should set aside more money to the saving. The financial adviser may suggest you to tight your spending. Perhaps, you may change your car or resize your house that saves thousand dollars.
3. One element of financial planning is investment. The goals will influence the number of money that you should invest. If the goal is high, they should dare to invest at high risk investment because it could make more money. As consequently, you are dare to take the risk. The possibility of loss is high too.
The portfolio of your investment may contain stock and junk bond. The portion stock could be 90% of the portfolio. Due the economic tight, this portfolio is not profitable too.
The worker whose has financial goal to retire early must save more money. As the life expectacy is greater, they need more money. They will not recieve the paycheck from the boss again. They can start the business early. The easier business opportunity is the selling. Selling anything that you like and you know.
The effect of the goals is very real. You should be careful to create the financials goals.