# Goal Planner

## What is Financial Goal Planning?

Financial Goal planning refers to setting financial goals and developing plans to achieve them. Your financial goals can be short-term, medium-term, or long-term. Short-term goals can be achieved within a span of one to three years. Examples are building an emergency fund or investing for a vacation. The medium-term financial goals could be buying a car or an SUV.

The long-term financial goals usually take a longer span of 10-15 years or even more. Examples are planning for retirement, buying a home, or saving for your child’s education and marriage. You must always invest for your financial goals based on the time horizon and risk profile.

Financial goals such as children’s marriage, buying a house, or a car are high-value goals. You must plan and invest your money to achieve these goals over a longer period of time. Financial goal planning helps you decide where to put your money. You can select the best investments based on your risk appetite and stay on track to achieve your financial goals.

Financial goal planning helps you to get more organised with your money. For example, you would have to cut down on excessive spending to achieve a financial goal such as saving for your children’s higher education.

## What is a Financial Goal Calculator?

The financial goal calculator is a simulation, that shows you the value of a future financial goal. It works on the future value concept. The calculator consists of a formula box, where you enter the current value of the goal, and after how much time you require the amount and the expected rate of inflation. The financial goal calculator will show you the future value of your goal.

The financial goal calculator goes a step further and also shows you the amount you must set aside to achieve your financial goal. You must enter the expected return on investment and any amount kept aside for the financial goal.

## How does Financial Goal Calculators work?

The financial goal calculator uses the concept of future value to calculate the accumulated corpus at the time of the financial goal.

You will have to use the formula:

FV = PV (1+R)^N

FV = Future Value
PV = Present Value
R = Rate of return on the investment
N = Duration or time-frame of the investment.

For example, the current cost of a financial goal is Rs 10 lakh. You want to calculate the value of the financial goal after 8 years. Assume an inflation rate of 7%. The financial goal calculator will calculate the future cost of the goal as:

PV = 10,00,000
R = inflation rate at 7%
N = Duration to the financial goal which is 8 years away

FV = 10,00,000 (1+0.07)^8 = Rs 17,18,186.

Let’s calculate the savings you must set aside each month to accumulate the requisite corpus. You have currently not saved any money for the financial goal. Let’s consider the expected rate of return on the investment at 8% per year.

You can use the PMT Function in the Excel Calculator where you enter the rate = 8/100/12 (convert to a monthly rate).

You must calculate the period of the investment in months = 12 * 8 = 96 months.

Put PV = 0 and FV as per the earlier calculation = Rs 17,18,186.

The financial goal calculator shows you the investment required per month to attain the financial goal as Rs 12,835.

## How to Use the ClearTax Financial Goal Calculator?

The ClearTax Financial Goal Calculator is an easy-to-use tool for calculating the future value of your financial goal.

• You must enter the present value of the financial goal
• You then fill up the expected inflation rate
• Enter the duration of the financial goal in months
• The ClearTax Financial Goal Calculator will show you the future value of your financial goal
• If you have already invested some money for the financial goal, you must enter the amount
• You must fill up the expected rate of return on the investment
• The ClearTax Financial Goal Calculator will show you the investment required per month to meet the financial goal.

## Benefits of Using the ClearTax Financial Goal Calculator

• The ClearTax Financial Goal Calculator shows you the amount you must set aside each month to reach the financial goal.
• You can select the right financial instruments based on your risk profile to attain your financial goals.
• You get a picture of the future value of your financial goal. This helps you to budget expenses and focus on achieving these goals.
• You can save for important life events and plan your investments in a better way.