By Sabrina Loh
Do you ever feel like you’re working so hard but the money in your bank account isn’t increasing much? Or maybe you’ve been trying so hard but it still looks like you have nothing to show for it?
Maybe, what you need to do instead, is set tangible financial goals.
If you don’t set a target to work towards, you’ll keep spinning like a hamster on a wheel, always working your bum off but never getting anywhere.
What are financial goals?
Financial goals are targets you have for your money that you hope to achieve over a set period of time.
You can have short-term and long-term financial goals.
Short-term goals motivate you to reach your targets and enjoy what you sowed sooner. It can also give you a confidence boost to achieve your larger goals that take more time.
Some examples of short-term goals are building an emergency fund, saving for a holiday, paying off credit card debt, or creating a budget.
Long-term goals typically take more than 10 years to accomplish and usually revolve around saving for retirement, buying a house, or investing.
The importance of realistic financial goals
To be a realistic goal, the goal needs to be within reach.
If you set goals that are too difficult to complete, that may discourage you and lead to burnout.
However, don’t fall into the trap of thinking that only easy financial goals are realistic. It’s just as important to have goals that motivate you.
Try to find the sweet spot between goals that are challenging and motivate you, but not too impossible that the chances of failing are high.
Here’s how to set financial goals in x steps:
Step 1: Find your inspiration
Think about where you want to be and why you want it. Attaching a purpose to your goal will keep you motivated and put things in perspective.
For example, saving up 6 months' worth of emergency funds, so that you can afford to pay rent if you lose your job.
Or, saving up to buy a house so that you can create your dream home and create new memories there.
Step 2: Assess your situation
Look at where you stand right now. How is your financial health looking?
Assess your income, debt, and expenses so you know what is your starting point and how far you need to go.
Step 3: Think SMART
Your goals should be SMART:
Don’t just say, “I want to pay off debt” That’s too vague. Be specific and try this instead — I want to pay off RM3000 in debt in 6 months. That means I have to pay RM500 a month to accomplish it.
Or take this scenario — you would like to go on holiday. Do your research to estimate the costs, and determine whether this cost is realistic given your income and your timeline. If it’s not, consider going somewhere cheaper or pushing the deadline so you have more time to save up. Then use your budget to create a plan to achieve this.
Your goals should be challenging but still achievable.
Step 4: Work with your budget
Your financial goals and your budget go hand-in-hand. Without a budget and a clear plan, it’ll be more difficult to achieve your financial goals.
A solid budget allows you to review your overall financial plan and adjust as needed to reach your goals. It’ll also help you to feel in control of your financial situation and the confidence to persevere during periods of financial adversity.
Step 5: Write them down
Once you’ve identified your financial goals, write them down. Whether it’s on paper, spreadsheet, or in your journal, check-in periodically and track your progress.
Examples of financial goals (but remember to make yours SMART!):
Make a budget and stick to it
Save an emergency fund
Save a down payment for a house
Leave an inheritance for your children
Save to remodel your house
Pay off mortgage faster
Build a diverse investment portfolio
Save for retirement
Save to travel around the world
Make more money
Pay for your children’s education
Start a business
The Bottom Line
It can feel like there’s a lot of pressure to set and achieve your financial goals. But remember to reward yourself for making progress. Soon, you’ll be well on your way to ticking every goal off your list!
Tune into the BigPay blog every week to learn more finance tips like this.