Dear students,

Welcome to today's video lecture on SMART goal setting in personal finance. Achieving financial
success and stability requires a clear vision and a strategic plan to reach your objectives. This is
where SMART goals come into play. SMART stands for Specific, Measurable, Achievable, Relevant,
and Time-bound, providing a structured framework to effectively set and accomplish your financial
goals. Whether your aim is to save for a car, a home, pay off loans, or build a retirement fund,
understanding and applying the principles of SMART goal setting will empower you to make
informed decisions and take deliberate actions that align with your financial aspirations. So, let's dive
into the world of SMART goals together.

Slide 2

The first and most important step in financial planning is setting goals. As the famous quote says, "If
you don't know where you are going, how do you expect to get there?" Therefore, it is crucial to
have clear financial goals before starting your financial planning journey.

Slide 3:

Let's begin by understanding what goals are. A goal is the desired end result that a person intends to
acquire, achieve, do, reach, or accomplish in the near or distant future. Setting goals is similar to
creating a map for a road trip. Just as we consider whether the destination is worth visiting and if we
have the necessary resources to complete the journey, it is important to ask these questions before
embarking on any financial journey.

Slide 4:

Why is goal setting so important in financial planning? Setting goals helps us achieve four essential
things. First, goal setting provides a path for our future. For example, if your goal is to score the
highest grade in your class, you would devote most of your available time to studying, thereby
creating a clear path for the year. Setting goals also helps us live the life we want. It allows us to buy a
good car, a nice home, and lead a comfortable life after retirement. Additionally, goal setting aids in
decision-making. When you have well-defined goals, you can allocate available funds to different
purposes effectively. For instance, if you have an extra ₹2000 in your budget, you can decide whether
to spend it on leisure, pay off your credit card bill, or add it to your emergency fund. Goal setting
contributes to our financial well-being by helping us achieve our dreams, such as buying a car, a
house, funding education, and enjoying a comfortable retirement. For all these reasons, goal setting
is of utmost importance.

Slide 5:

Before diving into financial planning, it is crucial to differentiate between wishes and goals. On this
slide, four different activities are shown, representing your aspirations or wishes soon. Out of these
activities, buying a car can be considered a goal, while the remaining three do not require deliberate
planning or actions, and thus cannot be categorized as goals. Every goal requires careful planning,
deliberate actions, and proper monitoring.
Slide 6:

Each individual has personal, financial, and professional goals. Personal goals may involve learning
new skills, engaging in community service, or pursuing creative endeavors. Professional goals may
revolve around career advancement or starting a new business. Financial goals, specifically, are those
that have a financial cost attached to them. For example, learning a new skill or achieving a higher
position in an organization may not require financial investment, but buying a car or a house does.
Different financial goals arise at various stages of life. In your youth, your goal may be buying a new
car, while in middle age, funding your child's education becomes a priority. As you approach
retirement, you aim to retire with a comfortable sum. Prioritizing goals at different stages is essential,
and priorities may vary among individuals. There is no right or wrong priority—it depends on
personal preferences. However, it is crucial to understand the difference between financial goals and
financial wishes. Buying a car can be a goal, whereas buying a luxury smartphone or a Rolex watch
falls under the category of financial wishes.

Slide 7:

Financial goals can be categorized into three types: short-term, medium-term, and long-term goals.
Short-term goals have a time frame of one to two years, while medium-term goals span two to five
years. Long-term goals extend beyond five or ten years and require periodic review to ensure you
stay on the right path.

Slide 8:

Short-term goals may include going on a vacation, getting married, pursuing higher education, or
buying a new car. Medium-term goals encompass buying a new house or funding a child's education.
Long-term goals revolve around retirement planning. For example, buying a new car does not require
a planning period of more than five years, while funding a child's education is considered a medium-
term goal.

Slide 9:

Financial goal setting helps you manage your money, control your spending, achieve your life goals
and wishes, and ultimately enjoy a proud and comfortable retired life.

Slide 10:

Financial goals need to be SMART, which stands for Specific, Measurable, Achievable, Realistic, and
Time-bound. Every financial goal, or any goal in your life, should be assessed using these conditions.
Let's discuss the details of each characteristic.

Slide 11:
All the goals you set must be specific, clearly defining the outcome you desire. For instance, if you
are saving money, specify whether it is for higher education, buying a new car, or retirement. If you
are saving for a car, determine whether you are saving for the down payment or the entire cost of
the car. This specificity ensures a clear understanding of your goals.

Slide 12:

Your goals should

be measurable, meaning you should be able to quantify them. When a goal is measurable, you can
easily track and review its progress. To make your goal of buying a car measurable, specify the
amount you will save for the down payment each month—for example, ₹10,000 from your salary.

Slide 13:

Your goals should be attainable. Considering your constraints and priorities, you should be able to
achieve your goals. For instance, if you want to achieve your car-buying goal in a shorter time, you
can save more per month. You may choose to cut down your entertainment budget and allocate that
amount toward buying a new car. However, it would not be advisable to reduce your grocery or fuel
budget, as these are necessities. In that case, your goal would not be attainable since you cannot
compromise on essential expenses. To ensure your goals are attainable, evaluate your current
situation, break them down into manageable steps, and consider potential obstacles or challenges
that may hinder your progress.

Slide 14:

Review your available resources—financial resources, time, support systems, and knowledge.
Determine if you have enough resources or if you need to acquire them to achieve your goals.
Remember, an attainable SMART goal should push you to grow while remaining within the realm of
possibility given your current resources and constraints.

Slide 15:

Your goals should also be realistic and relevant. They should align with the larger picture of your
finances. When setting realistic goals, trade-offs and opportunity costs come into play. For example,
if your average monthly salary is ₹1,00,000, setting a goal to buy a luxury car worth ₹1,00,00,000
would not be realistic.

Slide 16:

Moreover, your goals should be relevant. They should align with other practical possibilities in your
environment. Creating a retirement corpus of ₹50,00,000 may be attainable, but it is not realistic
because you don't need ₹50,00,000 as an emergency fund. Generally, an emergency fund of 3 to 6
times your monthly salary is sufficient. It's essential to differentiate between attainable and realistic
goals.

Slide 17:

Let's clarify the distinction between attainable and realistic goals. Attainable goals focus on the
feasibility of achieving them based on available resources and capabilities. Realistic goals ensure that
the goals align with other practical possibilities in your environment. Many times, attainable goals
may not be realistic or relevant. For example, creating an emergency fund of ₹50,00,000 is
attainable, but it is not a realistic goal. However, creating a retirement corpus of ₹5,00,00,000 can be
both attainable and realistic.

Slide 18:

A time-bound SMART goal has a specific timeframe or deadline attached to it. The "T" in SMART
stands for "Time-bound." Setting a time-bound goal creates a sense of urgency, helps you stay
focused, and motivates you to achieve your objective within a defined period. It enables you to track
your progress and maintain momentum as you work towards your desired outcome.

Slide 19:

To summarize what we have discussed, ensure your goals are specific, measurable, attainable,
realistic, and time-bound. Each goal should possess these characteristics. Be clear and precise in
setting your goals, specifying the exact amount and assessing their feasibility with the given
constraints. Make sure your goals align with your current financial position and mention a deadline
or timeline for each goal.

Slide 20:

On this slide, a few goals are listed, such as saving money to create an emergency fund, cutting down
on eating out to save for an emergency fund, saving a percentage of salary each month for the
emergency fund, creating an emergency fund equivalent to six months' living expenses, and
achieving this savings amount within two years. Can you categorize these goals as specific,
measurable, attainable, realistic, and time-bound? Remember, each goal should possess all these
characteristics.

Slide 21:

Here is the answer categorizing the goals according to the SMART criteria.

Slide 22:

Now, let's move on to examples of short-term goals.

Here are examples of medium-term goals.

Slide 24:

Finally, these are examples of long-term goals.

Slide 25:

When setting goals, please follow this checklist:

- Differentiate between wishes and goals.

- Prioritize your goals, placing important ones like retirement funds and emergency funds at the top.

- Determine the money needed to accomplish each goal and assess its feasibility with available
resources.

- Evaluate your timeline accurately. For instance, retirement funds require a timeline of 20 years or
more, while buying a car can be achieved within two years.

Slide 26:

To set any financial goal, follow these steps:

1. Identify your goal, ensuring it is a SMART goal.

2. Prioritize your goals, giving more importance to generating an emergency fund than going on a
vacation, for example.

3. Understand the financial cost associated with each goal.

4. Set a timeline for each goal. For example, the timeline for buying a house should not exceed five
years, as housing prices tend to rise continuously.

5. Prepare a budget for your monthly income and expenses after setting the timeline. Determine
how much you can save and allocate funds wisely to different investment instruments, ensuring you
have the required amount when needed.

In the upcoming lectures, we will delve into wise investment strategies, enabling you to achieve your
goals within the given timeline without compromising the enjoyment of life.

Thank you, and see you in the next lecture!