Most people have not really
thought through the purpose of money in their lives. They are too busy in
making, spending and worrying about it. While asking these people in the
affluent middle-class, the so-called mass affluent, what is the specific about
the purpose of their money in their life? They tend to talk about things. They
usually come back with such comments as to buy a dream car or house, pay for
the children’s college, have an Rs2 crore net worth at retirement or travel the
world etc.
But these specifics are not
purposes. They are merely goals or ways
to spend money once it’s acquired. Each goal is tangible, temporary, easy to
set, and easy to change or drop. Such
goals also are what many people give as the reason for investing.
A purpose, on the other hand,
goes much deeper. It’s not an end. It’s a direction you would like to take over
the long haul with specific goals serving the milestones along the way to help
monitor your progress. Purpose sets the context within which priorities are
determined.
To provide a better sense of
understanding the difference between purposes and goals, we set the example, if
you are in New Delhi, and your purpose is to head east, Mumbai could be a goal.
Once in Mumbai, you still can go farther east. Similarly, if your purpose is to
become wealthy, having Rs 10 crore could be a goal. And once that goal is
attained, you can set higher goals.
It’s vital to have both goals
and a purpose or vision. So, you have to understand that why you want to have
money comes first. Once that’s clear, it
becomes the context in which to create a meaningful financial plan with set
goals and priorities. Putting purpose first makes decision making much easier.
For example, if you want Rs3
crore in your retirement plan at the of age 60, that’s goal. If you want to be
free from money worries by retirement age, that’s the purpose. To have
well-educated children is a major purpose of money. A related goal within that
context could be to save the money necessary to send your children to college. Read also:Get-Set Returns for your Goals!
So, purpose and goal are interlinked, which
makes it hard to make out a difference between the two. Purpose, which is all
about direction, is that something that influences goals. Unlike goal, purpose
is broader and deeper. Our goals may be the set of our sail, but at
some point in time we need to decide where we are sailing to.
To be truly fulfilled we need
to have a purpose in at least 3 areas behind our goals viz. vision, security
and peace of mind. Vision, of course, being the most important. All goals need
a destination. This is why I can't say enough about the importance of our
vision statements. Taking the time to write a vision statement forces us to
have a purpose. Without a purpose we are just wandering aimlessly through life
hoping something good will happen.
Take a classical example of a
couple having a good amount of life insurance and disability insurance. They
have a healthy emergency fund. They have a balanced investment portfolio,
invest monthly and automatically. In fact, it may be quite boring. Yet it gives
them a great deal of peace of mind and comfort knowing that with each financial
decision they make, they are becoming more financially secure and that is the
real reason behind their financial goals.
Purpose endures and is much
more than a goal. It establishes the context within the financial planning
process takes on its meaning.
"I
finally know what distinguishes humans from the other beasts": financial
worries. – Jules
Renard
No comments:
Post a Comment