The period over which the goals are monitored and reported on should be agreed with the client.
Benefits of goal-based planning
Goal-based planning provides a clear focus on specific financial objectives. This helps individuals to prioritise their financial goals and work towards achieving them in a systematic and organised manner.
With a clear focus on specific objectives, clients can avoid wasting time and money on non-priority activities, and instead direct their resources towards achieving their desired outcomes.
Achieving financial goals also helps to increase and maintain motivation. When individuals have clear and specific financial goals, they are more likely to feel inclined to continue working towards achieving them. This motivation can help them overcome obstacles and stay committed to their financial goals — even when faced with challenges.
Goal-based planning helps clients to make better financial decisions. With a clear understanding of their financial goals, individuals can make more informed decisions about their spending, investments and other financial activities. This helps to ensure that financial resources are being used effectively and that decisions are aligned with long-term financial objectives.
Finally, goal-based planning can lead to improved financial wellbeing. By achieving specific financial objectives, individuals can improve their financial position and increase their financial security. This can provide greater peace of mind and enable them to enjoy a higher quality of life.
Downsides of goal-based planning
Goal-based financial planning can sometimes lead to inflexibility. When financial decisions are based solely on achieving specific goals, there might be resistance to adapting the plan when circumstances change, or unexpected opportunities arise.
Concentrating on achieving specific financial goals may result in neglecting other important financial considerations. For instance, an individual focused solely on saving for retirement might overlook the need for emergency funds or the need for protection.
Goals will also have timelines attached to them, which could lead to an overemphasis on short-term or long-term objectives. This may cause individuals to neglect other important financial strategies, or fail to address critical aspects of financial health that require ongoing attention.
Setting ambitious financial goals can be motivating, but there is a risk of setting goals that are not realistic given the individual’s financial situation or market conditions. Unrealistic goals can lead to disappointment and frustration.
Focusing exclusively on financial goals might result in clients sacrificing their quality of life or personal well-being in pursuit of those goals. They might delay enjoyable experiences or neglect self-care due to their financial aspirations.
