“It’s all about the journey, not the destination.” It’s a quote you would have read in several contexts. In the financial world, it’s all about the journey and the destination.

The travel and fitness metaphor fits perfectly for the financial journey. When we think of a holiday, the first thing that hits our mind is the destination, then we save for it, and then we make the bookings either by train or plane, depending on our budget and time.

The same applies to fitness. Big goals can be exciting, but they don’t come with directions. It’s easy to say “I’m going to get into great shape this year,” but that doesn’t tell us what to do tomorrow. Therefore, thinking about the journey is especially important right at the beginning.

We all have so many things we want to achieve in the future. This can be buying a car, a home, going for a trip, planning for a peaceful retirement, etc. So it is easy to feel overwhelmed and sometimes worry about how you will achieve all your goals. This is where goal-based investing helps.
So in your financial journey, you need to start with the Goal. For what are you investing? The Goal is the purpose for investment. The goal is alike a compass that guides your decisions and actions, provides direction.

More importantly, it helps you identify your priorities. A good strategy is to have SMART(Specific, Measurable, Achievable, Realistic & Timely) goals. For e.g., when you have a goal of a home, a realistic and achievable goal would be the down payment required for the house and not the entire house cost.

Once the goal is defined, you will ensure that funds are available in the right amount at the right time for meeting specific financial goals. It prevents impulsive decisions. When you don’t have a goal attached to your investment, chances are that you may withdraw it to fulfil a desire, which could have been avoided or postponed. For instance, you may be tempted to buy that latest phone, some new clothes, a gadget, or indulge in an exotic holiday. If you have some surplus cash and your goals are set, you would exactly know how much you can splurge, invest or pay off debt.

Also, remember that the timelines of your goals are not the same. Some would be immediate, some in the near future and some distant future. The choice of products would differ based on the timeline, thereby automatically diversifying the investment portfolio. For e.g., if the timeline for a goal is immediate, then you should choose a safer product to invest in, as there is no point taking a risk. If the timeline is a distant future, you should consider medium to high-risk products, so that it fetches you decent returns that cover the inflation over the long period.

Mutual funds do offer a perfect solution for goal-based investing with products that range from low risk to very high risk and meet every requirement. I would urge you to refer to the product label that is given by the funds, which will give you an idea of whether the product is suitable for your goal or not.

The financial journey is a long one; make sure it’s a pleasant one.