Goal Planning: What Any Goal Actually Costs You Every Month

Goal Planning works out what a goal costs each month, and what it will cost by the time it arrives. Given the amount, the years, what is set aside, what is put away each month and the reader's own two rates, it returns the target in today's money and in goal year money, a year by year schedule, and the shortfall. Both rates are the reader's assumption, not a forecast.

Goal planning splits into two questions, and each needs its own instrument. A goal eleven years away is priced in money that will not exist for another eleven years, so the planner directly below takes six figures and the reader's own two rates and runs one goal out year by year. The panel further down takes three figures, assumes nothing whatever, and returns a monthly amount anybody can check on the back of an envelope. Neither instrument is worth building for its arithmetic. The figures they need are almost never kept in the same place: the amount sits in a fee schedule or nowhere at all, the date has been quietly avoided, and what is already set aside sits on a statement in a different app. A household that has never put them on one screen has never seen the figure that falls out of them.

Most households that run this honestly will see a figure larger than the money they have, and that is the ordinary result rather than a sign that something has gone wrong. The number this tool produces is a distance: the distance between what has been promised and what is currently available. Knowing its size is the entire reason to do the arithmetic, and it is a fact about division rather than a verdict on anybody.

Any goal a household carries runs the same way: every figure read off a named document except the two rates, which are nobody's document at all, the target moved into the money of the year it falls due, several goals added into one figure that all lands in the same month, and a shortfall with four honest responses and a fifth dishonest one.

One goal worked all the way through, on the reader's own two assumptions

The loaded defaults are the Bhosale household's education goal as it stands, and the planner returns these figures for them. An assumed 6.0 per cent a year very nearly doubles the target, so Rs 8,00,000/- in today's money becomes Rs 15,18,639/- in the money of the eleventh year. Rs 6,061/- a month across 132 months puts in Rs 8,00,052/-, and an assumed 7.0 per cent a year adds Rs 4,06,964/- of growth on top, so the plan reaches Rs 12,07,016/- by the date. The plan is Rs 3,11,623/- short. Closing it on those same two assumptions takes Rs 7,626/- a month rather than Rs 6,061/-.

The whole of that Rs 3,11,623/- is the distance between what the assumed inflation added to the target, Rs 7,18,639/-, and what the assumed return added to the money, Rs 4,06,964/-, less the Rs 52/- put in above the target by rounding. Those three figures are the only moving parts, and the shortfall is what is left when they are set against each other. Change either rate and all four figures change with it, which is the honest way to see how much of the answer was ever arithmetic and how much was assumption.

Set both rates to nothing and the planner reaches Rs 8,00,052/- against a target that has not moved from Rs 8,00,000/-, a surplus of Rs 52/-. The result is the panel further down reproduced exactly: Rs 6,061/- is Rs 8,00,000/- over 132 months rounded up to the next whole rupee, and the fraction of a rupee the rounding adds each month comes to Rs 52/- across the 132. Switch the rates off and the two instruments meet on the rupee. That agreement is the only reason to trust either of them.

One goal on the household's sheet cannot be run in the planner at all. Ira's admission deposit falls due in 26 months. That is neither two years nor three, and the planner counts in whole years. The panel further down counts in months and assumes nothing, so the deposit belongs there. A planner that quietly rounded 26 months up to three years would move the answer without telling anybody, so it refuses the goal instead.

What does this tool actually compute?

Three numbers go in: the amount the goal costs, how many whole months separate today from the date it is needed, and whatever has already been set aside for that goal and no other. One number comes out, the monthly figureThe amount that closes the remaining gap by the date, with no growth of any kind assumed on the money.: what closes the remaining gap by the date if the household puts away the same amount every month from now until then.

Take the smallest of the Bhosale household's three goals. Ira Bhosale moves to the next school stage in a little over two years, and the admission deposit at that stage is Rs 60,000/-. Nothing has been set aside for it. The date is 26 months away. Rs 60,000/- less nothing is Rs 60,000/-, divided by 26 months is Rs 2,308/- a month. The subtraction and the division are the entire computation, and an envelope is enough to check both. Being checkable is the only reason to trust the answer.

Most households carry more than one goal, and two more outputs appear the moment they do. The monthly figures of every goal running at the same time add to the combined figureThe sum of the monthly figures for every goal running at the same time. A single month is asked for exactly that.. Set against what the household has left over each month, that gives the shortfallThe distance between the combined monthly figure and what the household actually has spare each month.. Three inputs, one operation, three outputs, and no step in between that anybody has to take on trust.

Where does the amount come from, if nobody has bought the thing yet?

The amount field decides everything else, and it has the least obvious source. What is being priced has not happened yet: a school stage nobody has enrolled in, a repair on a vehicle that is currently running fine, a buffer that has never existed at the size intended.

There are only three honest places a figure like that comes from. A published schedule, put out and updated by a school, a hospital or a college. A written quotation, given on request by a workshop, a contractor or a tailor. Or a person who has just paid for the same thing and still has the receipt. The amount is read off something, and a figure that has been read is a different kind of number from a figure that has been remembered, even when the two happen to be the same.

The Bhosale household's three amounts come from three different places and are not equally solid. The admission deposit of Rs 60,000/- was read off the schedule the next school stage publishes. The buffer amount was not read but computed: the household set it at three months of committed outgoingsThe outgoings that arrive whatever else happens in a month: rent, an instalment, maintenance, connections, food, power, fuel and medicines., and its committed outgoings are Rs 37,920/- a month, being Rs 19,400/- of fixed items and Rs 18,520/- of variable ones. Three months of that is Rs 1,13,760/-, taken off the household's own twelve month record of what it spends. A record nobody outside the house has seen is still a document. The third amount, Rs 8,00,000/- for Ira's higher education, came off nothing.

What goes in the months field, and why months rather than years?

The count runs in whole months from today to the month the money is needed. Not to the month it would be convenient to have it ready. To the month the money leaves the account. Where the date is genuinely uncertain, count the smaller number. A goal that arrives early with the money ready is a smaller problem than one that arrives on time with the money short.

Months rather than years, for a reason almost too plain to state. A household pays monthly, so the denominator has to be months, and a figure divided by years is twelve times too large to mean anything to anybody. If the date on a goal is nine years away, the number in this field is 108. If it is two and a half years away, it is 30. Converting years into months is the only arithmetic anybody does before the tool starts.

The Bhosale household's three horizons are 26, 36 and 132 months. Two came off a calendar somebody else set. The middle one, 36 months to rebuild the buffer, the household chose itself, and neither instrument here can tell a date on an admission letter from a date somebody picked on a Sunday evening. Both instruments can show what the choice costs per month. Costing a date per month is the only way a chosen date ever gets tested.

What counts as already set aside for this goal?

Money that has been allocated to this goal and to nothing else. Allocation to nothing else is the whole of the field. However comfortable it is to count, money doing a job somewhere else is not already set asideMoney the household has specifically allocated to one named goal and to no other, so that no rupee is counted against two goals at once. for this one.

Here is the everyday version. A street vendor keeps one tin for the rent and one for the wholesaler. On a good week the rent tin looks generous, and it is tempting to treat the same notes as the wholesaler's money too. Nothing has been stolen and nobody has lied. The two tins simply cannot both be full of the same notes. A rupee counted against two goals makes both of them look closer than they are, and the error is invisible because every individual line on the sheet is true.

The Bhosale household has Rs 30,180/- in its buffer savings account at 31 March. The buffer is what that money is allocated to, so the Rs 30,180/- goes in the already-set-aside field for the buffer goal. The same balance does not go in the field for the education goal or for the admission deposit. The household also has Rs 40,000/- of deposits paid into a recurring deposit, attached to none of the three goals on its sheet, so it appears in none of the three fields. Attach the Rs 40,000/- to the admission deposit and the tool would read Rs 20,000/- still to find over 26 months, or Rs 770/- a month instead of Rs 2,308/-. The same Rs 40,000/- cannot be attached to two goals at once, and which goal it belongs to is not an arithmetic question.

Leaving the field empty pushes the output up rather than down: the buffer goal reads Rs 3,160/- a month without the Rs 30,180/- and Rs 2,322/- with it, a difference of Rs 838/- every month for three years on the same goal and the same date, with one balance typed in as the only change.

What happens between the three inputs and the figure?

One subtraction, one division, one rounding. The amount less what is already set aside gives what is still to be found. What is still to be found is divided by the months. A figure rounded down does not reach the amount by the date, so the result is rounded up to the next whole rupee. Reaching the amount by the date is the only thing the number is for.

Worked by hand for all three of the Bhosale household's goals, in the order they appear on its sheet.

Between the left of that table and the right of it, nothing happens except a subtraction and a division. The output can therefore be trusted no further than the inputs. There is no model inside, no rate, and no adjustment for anything. If the three columns on the left are read off documents, the column on the right is as good as those documents. If one of them was remembered, so is the column on the right, and it will not look any different.

Which document sits behind each input?

Every field on the tool carries a field noteThe small line printed under an input, naming the document the figure on that line is read off.: a line underneath naming the document the figure is read off. Not what the field means, and not what a good answer would look like. Only where the number is found.

The field note is a habit borrowed from anybody who has to defend a figure later. In three months nobody will remember and somebody will ask, so a clerk who writes a number on a form writes the reference of the paper it came from beside it. A number with a document behind it can be checked by a second person; a number without one can only be believed. Each of the three field notes on this tool names a thing that physically exists.

How is the monthly figure read?

As an amount, and as nothing else. Rs 2,308/- is what closes a Rs 60,000/- gap in 26 months if nothing grows and nothing is added from anywhere. The figure is not what the Bhosale household should set aside, not what anybody in a similar position should, and not a score. It changes the moment any input changes, so it is a reading of today rather than a decision, and it says nothing about whether the goal is a sensible one. A monthly figure is a measurement of a gap, not an instruction about a gap, and that difference is what keeps the arithmetic honest.

What does a goal calculation assume about growth, and whose assumption is it?

The panel below assumes nothing. Not a return, not interest, not appreciation. Money set aside is treated as sitting exactly where it was put, and the arithmetic is what a person would do with an envelope and twenty six months. The planner at the top assumes exactly what was typed into its last two boxes and not one thing more.

The distinction between assuming nothing and assuming what was typed is the whole of the honesty. An assumed rate is a number somebody chose, and the output it produces is precise to the rupee whether the choosing was careful or careless. The moment a rate enters a goal calculation the output stops being arithmetic anybody can check and becomes a projection built on somebody's assumption, and a projection is a very short walk from a promise. So both rates belong to the reader, both are labelled as assumptions on the panel that uses them, and either can be set to nothing in a single click.

Leaving both out is not neutral either, and it cuts both ways. Assuming no growth on the money makes the monthly figure larger than it might turn out to be. Rs 8,00,000/- in today's money is unlikely to be what the same thing costs in eleven years, so assuming no growth on the price makes it smaller. The two do not cancel each other out: at 7.0 and 6.0 per cent the price ran away by Rs 7,18,639/- while the money grew by Rs 4,06,964/-, and the difference between those is nearly the whole shortfall the version with no rates never showed at all.

There is a second reason a version with no rates in it is worth keeping, and it is about who is reading. A household with no adviser and nobody to ask cannot audit an assumed rate. Such a household can audit a division. A figure the reader can check is worth having beside a figure that may be closer to some unknowable truth.

What does the shortfall actually tell a household?

One thing: the size of a distance. The Bhosale household's three goals call for Rs 10,691/- a month. Its surplusWhat is left in a year after all three kinds of outgoing, including the yearly ones that never reach a monthly plan, divided by twelve. is Rs 22,560/- across the year, or Rs 1,880/- a month. The tool subtracts one from the other and reports Rs 8,811/-. The Rs 8,811/- is the output the whole tool exists to produce.

Notice the limits on the number. The shortfall is not new: the distance existed long before anybody put a figure on it. It is not a reason to stop either. A household that knows the gap is Rs 8,811/- is in a materially different position from one that does not, twenty six months before the nearest of the three dates arrives. The shortfall is the first honest number in the whole exercise, and being able to look at it is the skill the exercise is for.

The Bhosale household is not an extreme case. The household ends its year ahead. There is a buffer, an account that works and a recurring deposit paid every month. The household was also short in five of the twelve months, and its buffer fell to Rs 10,400/- in February. A shortfall on the goal sheet is what that combination looks like written down, and it is the ordinary condition of an ordinary household rather than the mark of one that has done something wrong.

How do several goals run through the tool at once?

Each goal is run separately, and then the monthly figures are added. Never the amounts. The rule sounds fussy until the alternative is worked out: Rs 60,000/- due in 26 months, Rs 83,580/- due in 36 and Rs 8,00,000/- due in 132 add to Rs 9,43,580/-, a figure that is not owed in any month, is not due on any date and cannot be compared with anything the household has. Amounts falling due years apart do not add to a number that means anything. Monthly figures all fall due in the same month, so monthly figures can be totalled and amounts cannot.

The education goal is thirteen times the admission deposit as an amount. As a monthly figure it is a little over two and a half times it, accounting for Rs 6,061/- of the Rs 10,691/- total against Rs 4,630/- for the two small ones together. Considered one at a time it looks like the whole problem; totalled properly it is barely more than half of it.

What happens when the output will not close?

Four things can be done and the tool computes none of them. Move the date, and the months rise while the monthly figure falls. Cut the amount, and what is still to be found falls with it. Find more money, and what is left over each month rises while the shortfall falls, with no goal touched at all. Drop a goal, and its monthly figure leaves the total altogether.

Each of those four is a decision about a life rather than a calculation, and this tool makes none of them. The tool shows the arithmetic of any of the four the moment it is typed in. Showing the arithmetic is genuinely useful and strictly smaller. Moving the buffer date from 36 months to 48 redraws the panel above at Rs 1,742/- a month instead of Rs 2,322/-. Whether three years or four is the right length for that household to be without a buffer has no arithmetic answer.

A fifth response is to change nothing and stop looking. It is the only one that leaves the shortfall exactly where it was while making the sheet feel better. It is also the most common, and saying so is not a criticism of anybody. A number like Rs 8,811/- is hard to sit with. The tool prints it anyway because the four honest responses all need somebody to know the size of the thing they are responding to.

Who else runs this same arithmetic, and what do they look at first?

A lender assessing whether somebody can carry an instalment does a version of this in the opposite direction. The lender starts from what is left over each month rather than from the goal, and asks what size of monthly commitment fits inside it. Its arithmetic has a rate in it and this one does not, so the two figures will never match, but the denominator is identical: what remains after everything that has to be paid has been paid. The shared denominator is why the surplus line matters more than anything else on the tool.

A billing desk that offers to split an amount across months runs the same division, with the months set by its own terms. A person at a free help desk with somebody's twelve months of statements does it too, usually with a pen and usually starting from the outgoings. And a household that has never done it formally does a rough version constantly, in a sentence that begins with the idea of putting away something every month.

Accuracy is not what separates the written version from the sentence in somebody's head. The written one can be totalled across several goals and the one in the head cannot. Nobody holds three divisions and an addition at once while also remembering what is left over each month. Totalling is the entire advantage of writing it down, and it is enough of an advantage to be worth the discomfort of the number at the end.

The Bhosale household, Meghna Bhosale, Ashok Bhosale, Ira Bhosale and Sahyadri Freight Services Private Limited are invented.
Educational material. Not advice on any investment, tax, budget or market position.