24 Questions
What is the likely impact of inflation on long-term goals?
It increases the cost of the goal
What is the main drawback of the pool approach to savings?
It does not provide a clear horizon for investments
Why is it essential to consider inflation when planning for long-term goals?
Because it increases the cost of the goal over time
What is the impact of inflation on household expenses?
It increases household expenses
How does inflation affect the cost of education?
It increases the cost of education
What is the main difference between the pool approach and long-term goal planning?
The pool approach does not consider inflation
Why is it important to make assumptions when planning for long-term goals?
To make some assumptions to plan properly
What is the likely impact of 8% inflation on the cost of Shalini's higher education?
The cost will increase to Rs. 1,07,94,625
What happens when we assign amounts and timelines to our objectives?
We convert these into financial goals
What is the primary reason why one needs to invest their money?
Because the income may be less than the amount required to fund the goal
What is the first step in goal setting while planning for investments?
Identifying the events in life
What type of goals are retirement and children's education?
Responsibility goals
What is the purpose of an emergency fund?
To fund the expenses associated with undesirable events
What is an example of a desirable goal that can be planned?
Funding a child's education
Why is goal setting important in investment planning?
It helps to prioritize financial goals and allocate resources accordingly
What is an example of an undesirable event that may spring up as a surprise?
Hospitalization
What is the role of a financial advisor in the goal-setting process?
To provide guidance and help in making an informed decision
What is the importance of assigning a timeline and amount of funding required for achieving a goal?
It helps to plan and achieve the goal in a more structured manner
What is the classification of goals based on their timeline?
Immediate term, near term, medium term, and long-term
What is the characteristic of Mrs. D'Souza's goal?
It is a long-term goal with an uncertain timeline
How can Rabindra's retirement goal be classified?
It is a long-term goal with two objectives
What is the similarity between the goal classification matrix and the matrix discussed by Stephen Covey?
Both matrices are similar to the urgent vs. important matrix
What is the importance of evaluating goals in terms of their timeline?
It helps to plan and achieve the goal in a more structured manner
What is the role of a financial advisor in evaluating goals?
To provide guidance and help in evaluating goals
Study Notes
Role of a Financial Advisor
- A financial advisor helps individuals make informed decisions about their financial goals and plans.
- The advisor's role is crucial in guiding individuals to achieve their financial objectives.
Setting Financial Goals
- Identify financial goals and assign a timeline and estimated funding required for each goal.
- Classify goals into short-term needs versus long-term goals.
- Break down long-term goals into smaller, manageable objectives.
Goal Setting Matrix
- Critically important goals (responsibilities or needs)
- Dreams (desirable goals)
- Good-to-have goals (aspirational goals)
Examples of Financial Goals
- Funding a child's education
- Funding a wedding
- Retirement planning
- Buying a vehicle or home
- Taking a vacation
- Starting one's own business
- Taking a sabbatical from work
Importance of Goal Setting
- Goal setting is essential for investment planning.
- Financial goals involve a need for money that cannot be fulfilled through regular income.
- Investing helps bridge the gap between income and expenses.
Identifying and Prioritizing Goals
- Identify events in life that require financial planning.
- Assign priorities to goals based on importance and urgency.
- Create an emergency fund and consider insurance policies to mitigate risks.
Inflation Adjustment
- Inflation adjustment is critical for goal values to ensure accurate planning.
- Inflation can significantly impact the cost of goals, especially over long periods.
The Pool Approach
- Some individuals use a pool of savings and investments to meet financial requirements.
- However, this approach lacks clarity on investment horizons, which is essential for informed investment decisions.
Case Study: Shalini's Higher Education
- Example of calculating the future cost of higher education (Rs. 1,07,94,625 in 10 years) considering inflation (8% p.a.).
- Assumptions involved in planning, such as course fees and inflation rates, can significantly impact planning.
This quiz covers key concepts in financial planning, including setting goals, assigning timelines, and determining funding requirements for important life events such as buying a house. It explores the role of financial advisors and how to make informed decisions.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
