Benefits Of Financial Goal Planning Calculator
Financial Goal Planning Calculator – Plan all your types of financial and investment goals with the Fincart financial goal planner calculator online.
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Financial Goal Planning Calculator
Financial Goal Planning Calculator
All of us juggle multiple financial goals at once. From a blissful retirement to funding our children’s education to buying that dream home, managing these goals can be tough. Goal-based financial planning makes things easier. It is an approach through which investors identify and set specific financial goals and make personalised plans to achieve them. It allows investors to prioritise their goals, make realistic budgets, and track progress over time. With this method of planning, one can focus on each goal with more clarity.
A goal planner calculator can make this process even simpler. A financial goal calculator tells you how much you need to save and invest each month to achieve your goals. All you need to do is enter some basic information and let the goal calculator do the work.
What is a Financial Goal Planning Calculator?
A financial goal planning calculator helps you plan how you can realise your financial dreams. It is a tool that estimates how much money you would need to save and invest each month in order to accumulate the future amount needed for the goal. A big advantage of using a goal planner is that you don’t have to calculate the future value yourself. You simply need to enter your goal’s present value, and the calculator does the rest by adjusting for inflation to give you a clear picture of your target.
You also need to specify how far into the future you aim to achieve your goals, and what kind of returns you are expecting on the investments. Choosing a realistic tenure is important, as is entering the right return expectations that match your risk tolerance. A goal planning calculator also allows you to add any existing progress towards your goals. So if you’re not starting from scratch, the calculator can accommodate your current situation so a clearer and more accurate picture can be formed.
Why is Goal Planning important?
How do I determine my financial goals?
To determine your financial goals, first, you need to figure out where you stand. Start by assessing your present financial situation. Consider your income and expenses so you can create a budget. A budget not only helps you get a handle on your finances on a daily basis but also shows where you can cut unnecessary expenses and redirect that money toward investments.
- If you have any debts, like education loans, prioritise paying them off early to save money on interest. Remember that good debt management can allow you to still work on other goals while dealing with debt. Take stock of your savings as well, so you know how much you’ve already set aside for your goals.
Next, think about your priorities. Both short-term goals, like a vacation or buying a car, and long-term ones, like retirement or saving for a home, should be considered. For example, if you’re a young professional in your mid 20s, you’ll have several goals - buying a car, planning a wedding, saving for a home,children’s education, and so on.
Once you’ve done that, make your goals as specific as possible. Financial advisors recommend one great way of doing this is the SMART method, which stands for Specific, Measurable, Achievable, Relevant, and Time-bound. The idea behind this is that if your goals meet these 5 criteria, your chances of achieving them increase greatly. For example, if you want to buy a car for Rs.
Now, calculate the present value of your goal. This means figuring out how much it would cost if you were to achieve it today. For example, for retirement, think about things like where you’ll live, what your living expenses will be, healthcare costs, and any hobbies you want to pursue, like travelling.
How Does the Financial Goal Calculator Work?
A financial goal planner takes into account different parameters such as your current savings, the present cost of your financial goal, the rate of inflation, the duration of the investment, and the return you expect on your investment. When you enter this information in the goal planning calculator, it uses the concept of the future value of money to estimate how much your investments will grow by the time you reach your financial goal. Then it displays the amount you will need to save each month to realise your financial dream.
Here’s the formula it uses to calculate the future value:
FV = PV (1+i)n
Where,
- FV = Future Value
- PV = Present Value
- i = The expected rate of inflation
- n = The investment duration in years
After the future value has been estimated, one can calculate how much money one would need to invest each month to accumulate the amount. For this, Excel’s PMT function can be used. Here’s the syntax for the PMT function:
=PMT(rate, nper, pv, fv, [type])
Where,
- rate: The monthly expected rate of return
- nper: The number of periods in months for the investment.
- pv: The present value
- [fv]: The future value you calculated previously
- [type]: Use 0
Time to understand how the calculation is done with an example. Suppose Ram wants to know how much he needs to save each month to reach a goal in 10 years. He estimates the present value to be Rs. 15 lakh and expects his investment to return 12%. Let’s calculate assuming a 6% rate of inflation.
First, let’s calculate the future value of Rs. 15 lakh.
Using FV = PV * (1+i)n
Where,
PV = 15,00,000
i = 6 = 0.06 in decimal
n = 10
FV = 1500000 * (1 + .06)10
FV = Rs. 26,86,271.54
Before using the PMT function, we must convert the annual rate of return into a monthly rate of return.
Rate = 0.12/12 = 0.01
Now using the PMT function: =PMT(rate, nper, pv, fv, [type])
Rate = 0.01
Nper = 10 * 12 = 120
Pv = 0
[fv] = 26,86,271.54
[type] = 0
The result is Rs. 11,677.48
This means Ram needs to save approximately Rs. 11,700 each month to reach his goal. This calculation can be tedious and time-consuming, but a financial goal planner calculator can give you an accurate result in a second!
Benefits Of Financial Goal Planning Calculator
Some of the perks of using Fincart’s goal planning calculator are:
- It simplifies the process of achieving your financial goals by determining how much you would need to invest every month to reach your goals. When you have a clear target to work towards you're more likely to stay motivated and succeed.
- With a clear target, you can make a realistic budget to make sure you save enough to invest each month. This also instils a disciplined saving habit which is important for financial success.
- You input the present value of your future financial goal into the calculator. Finding out the present value of your financial goal that is still years away is much easier than speculating what it would cost in the future.
- The calculator also allows you to enter your current investments and show their future value so you can gain some insights into your investment’s trajectory.
- Manual calculations are complex, time-consuming, and prone to errors. Our calculator saves you a lot of effort and gives precise results
- It takes the rate of inflation into account to give you a more realistic estimate.
- You can use our free calculator as many times as you’d like, and play around with different scenarios by adjusting variables like duration and expected returns. This will give you a deeper understanding of how these factors impact your financial goals.
- Using a goal planning calculator before making investment decisions is important because the overview it provides enables informed decisions. It helps you create a clear investment strategy and prioritise your goals.
How to Use the Fincart Goal Planning Calculator?
Let’s talk about how you can use Fincart’s goal planning calculator. Follow these simple steps to estimate how much you need to save and invest every month to reach your desired financial goal:
- Step 1: First, you need to enter the duration of the investment in years, and set a timeline for achieving your goal.
- Step 2: Then, you can specify any savings that you may have already set aside for the goal. If you’re starting from scratch, just enter zero.
- Step 3: Enter the present value of your goal, that is, how much money you would need to achieve the goal today. For example, if you're saving for a down payment on a house and you've determined that you need Rs. 10,00,000 in today's terms to make that purchase, you would enter Rs. 10,00,000 as the present value of your goal.
- Step 4: Now enter the expected inflation rate per annum. Generally speaking, the rate of inflation is around 6% or 7%, but if you’re more specific, you can get a more realistic estimate of the future value required to realise your dreams. For example, if your financial goal is to invest for your child’s higher education, enter the education inflation rate. In the last decade, the education inflation rate has been somewhere around 11% to 12%, which is almost double the consumer price inflation.
- Step 5: The last thing you need to input is the expected return rate per annum. While entering this make sure it reflects your risk profile.
- Step 6: Press calculate. The calculator will display how much you need to save and invest every month in order to realise your dream! Feel free to tinker with the calculator and make some tweaks to the expected return rate or investment duration to see how different scenarios can impact your goals!
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