Most of us have financial goals, but we rarely get around to identifying them. This is natural because
thinking about the future isn’t something we do every day. It even demands the use of a part of the
brain, the prefrontal cortex, that is used to imagine future scenarios. We often don’t invoke the prefrontal
cortex to help plan long-term goals, and even when we do it is difficult to prioritize a range of goals
at various time periods. We’re particularly bad at estimating how much we need to save in order to fund
goals over time.
One of the most important benefits of goal-based planning is simply forcing us to think about what matters
most in our lives. Do we really need that special home when we retire if it means we have to sacrifice
other goals such as saving for a child’s education? And how much do we actually need today to fund all
of our future goals?
Getting the best out of goal-based investing Determine and analyze your current financial situation
and then set goals. This activity involves in understanding what you want to do with your money and
how you want your financial future to look like. Goal based planning is set in three time frames; short-term,
mid-term and long-term.