Wednesday, April 8, 2009

How to Set S.M.A.R.T Goals

In financial planning, the most important thing that you need to do is to set financial goals. Your goals could be controlling your spending so that you could pay off your study loan or buy a home/car. Regardless of what your goal is, ensure that it is SMART i.e. specific, measurable, realistic and can be achieved within a certain time frame. So learning to identify and set clear goals is key to your success in life.

Your specific goals will depend on a number of factors-your values, age, financial situation, and interests.

Sample of financial goals

  • controlling your money so you have a little left over every month
  • paying off debt
  • having an emergency cushion in case of car break down or medical emergency
  • buying a home
  • buying a car
  • saving for retirement
  • purchasing "big-ticket" items, like electrical appliances
  • planning a vacation

What is SMART goal?


Example: Johan's goal:

To save for a vacation in Pulau Redang that costs RM1, 000 in 4 month's time. He needs to save RM250 per month.


To go for a vacation in Pulau Redang – NOT want to go for a vacation


Need to have RM1,000 – NOT need to have money


Must save RM250 per month – NOT waiting for someone to give free traveling gift voucher


To go to Pulau Redang in 4 month’s time – NOT to go to London in one month’s time based on RM250 savings per month


To buy it in four month’s time – NOT when I have money


Examples of goals based on certain timeframe:
  • Short-term goals can be done in a week or a few months, but no longer than a year. Buying new clothes and saving for a vacation are short-term goals.
  • Intermediate-term goals can be accomplished in one to five years, such as buying a new car or paying off debts.
  • Long-term goals are five years or more, like buying a house or saving enough money to put your children through college/universities.

Remember, you may have all three types of goals, but keep them realistic. Goals that are set too high will frustrate you and you will be tempted to abandon them. Goals that are vague will not motivate you at all. Rigid goals will not work especially when your situation changes. Whatever your goals are, leave some space for adjustments. Prioritise your goals based on which are the most important to you as an individual and which are the most important to your family? Good luck!



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