I used to hate goal setting.
I hated it so much that I’d avoid it altogether, especially when January rolled around. I figured that if I just focused on the ‘doing’ consistently, that I’d get to where I wanted to go … eventually.
Wrong, because without specific financial goals in place, I had no idea where I was going other than “I want to save more” or “I want to save enough to go on a work sabbatical for a year”.
Yes, I did learn how to budget and yes, I did save quite a bit, but my ‘destinations’ were so blurry that I ended up not taking them as seriously as I should have.
This vagueness also meant that I didn’t have a fire under my butt to push me to dream bigger or be more aggressive with my financial goals.
I worked, I saved, I dollar-cost-averaged into unit trust funds and stocks, and that was it.
When I reached significant money milestones, I was always disappointed in myself.
And I felt this way mostly because I realized that I probably could have reached it a lot sooner had I earned, saved and invested even more and invested differently all that time.
I also questioned my choice in career path: Would I have grown my earning power significantly doing something else? How much more would I have earned if I’d started negotiating my salary earlier on in my working life?
I’d left so many financial goals unrealized and collecting dust on the shelf.
How I Got My Goal-Setting FIRE Going
My financial life remained mostly blurry until I stumbled across the idea of financial independence and retiring early.
For the first time in my life, I heard about concepts like savings rate, FIRE number, safe withdrawal rate, lean FIRE, fat FIRE, barista FIRE, stealth wealth and The Rule Of 72.
My mind was blown, and I finally had something bigger to work towards beyond ‘saving more’ and hoping for the best.
There was hope for me yet, and fire under my butt was lit.
What Are Financial Goals?
Financial goals are simply money milestones that you plan for and commit to reaching that will allow you to live the way you want to.
Note my emphasis on ‘want’, not ‘have’ to.
All of us have aspects of our finances that are out of our control — things like the price of groceries, stock market returns and whether or not the boss agrees to give us a raise.
This means that whatever the outcome, we have to accept, live with or work around it.
Planning for and committing to a specific financial outcome, on the other hand, will always tell you what your end result is going to be.
It will give you the means to be in control over something that you want.
That something could be:
- Saving up for a new car.
- Starting a side-hustle that’ll earn you an extra RM1,000 or more per month.
- Setting aside RM200 a month to invest.
- Shifting from a scarcity-based mindset to an abundance-based one.
- Automating your finances so you can spend more time on living and less on managing your money.
- Building a 12-month emergency fund so you never have to worry about losing your job unexpectedly.
- Spending less than 50% of your monthly income so you can become financially independent by 40.
As you can see, your financial goals can revolve around just about anything that’s money-related, not just saving.
Good financial goals usually come with a detailed plan, and together, both can serve as a map that shows you how to get from A to B.
Without a detailed plan to accompany your goal, you’ll probably struggle to get started and just as likely, find it difficult to make your way to the finish line.
But to start with, you have to figure out what you want to achieve.
Why Are Financial Goals So Important?
Having a potentially life-changing money milestone to reach for is one major benefit, but the following reasons are just as important:
Less stress, more progress.
The act of setting a financial goal means having to put your head down and dig deep into your finances — the good and bad.
This means crunching the numbers to figure out where you are now so you can plan how to get to where you want to go. The initial steps may feel rough, but facing your financial reality head-on will take the stress and anxiety of not knowing out of the equation.
It’ll also get you in the habit of confronting your financial issues early on instead of avoiding them and letting them fester.
They’ll force you to look ahead.
Having to come up with a plan for how to get from A to B also means planning for the unexpected.
Life being life, it’s more than plausible that things may not go the way you want them to.
For example: So you’ve set an ambitious goal to retire with RM3mil by the age of 38, but what if you get fired from your job unexpectedly? What if you were planning to retire child-free but end up have a child (or two) anyway? What if you develop a major illness that takes a big bite out of your retirement nest egg?
Planning for a specific financial outcome asks that you be pro-active about potential obstacles that may derail your progress way before they happen, and the better prepared you are, the more quickly you’ll be able to recover from a setback.
They’ll help you win more.
Setting smaller, easily achievable goals that you can win at will build the confidence you’ll need to go after bigger ones.
Just like how an athlete would break down their entire training program into smaller ones that they progressively build on as they get stronger, faster and more skilled, starting with easily-achievable goals can help set you up for financial success that you’ll keep wanting to level up on.
There Are Three Types Of Financial Goals
Your goals will typically fall into one of three buckets:
Short-Term Goals: 12-24 Months
These are short-term ‘events’ that you can realistically achieve within a year, and include:
- Saving up for a new phone.
- Saving up for a local holiday.
- Negotiating for a higher salary.
- Saving up for a minor home renovation.
- Building a gift fund for Christmas.
- Saving up for a wedding.
- Earning an extra RM1,000 or more per month with part-time work.
- Filling up 10% of your 12-month emergency fund.
Since you’ll need to meet your goal within the year, it’ll need to be funded consistently from your income sources, like a monthly salary.
If your goal is increasing your income, you’ll need to commit to a plan that will likely involve building and sharpening your negotiation skills, documenting your performance at work, or building a side-hustle during after-work hours to get that extra cash flow coming in.
The less time you have to reach your goal, the more consistent effort you’ll need to put in.
Medium-Term Goals: 2-5 Years
These are goals that typically take several years to pull off, and can often serve as stepping stones to larger goals, where chipping away at them bit by bit can help get you closer.
They can include:
- Setting and refining your monthly and annual budgets.
- Saving for a home down-payment.
- Saving to buy a second-hand car in cash.
- Designing and creating an estate plan.
- Saving up for 2-month trip to Europe.
- Paying off a car loan.
- Building up funds that you plan to donate to charity.
- Planning to leave your job to take a sabbatical.
Long-Term Goals: 5 Years Or Longer
A long-term goal is the mother of all goals for a good reason: It’ll take plenty of discipline and determination to pull off.
These can typically take between 5 and 30 years to reach, and will benefit from being broken down into smaller annual or even monthly goals that you can start winning at without feeling overwhelmed.
The more clarity you have about why you want to reach these goals, the better prepared you’ll be mentally and financially to stay on course for the long-haul.
Long-term goals can be:
- Building a substantial stream of passive income.
- Figuring out your retirement timeline.
- How much you’ll need to retire with (this could be your FIRE number).
- Accumulating your retirement assets.
- Paying off a student loan.
- Paying off a home loan.
- Allocating your assets and rebalancing periodically.
- Saving to buy a new car in cash.
- Saving for your child’s education.
- Improving your financial literacy.
How To Set Financial Goals
Not sure how to go about this financial goal-setting business?
If you’re feeling intimidated about the whole thing, don’t be. And just in case you were wondering, no, you don’t need to be a financial expert to set a financial goal.
In fact, it’s not all that different from setting any other type of goal — all you need is a workable plan and a desire to make it a reality.
Here’s the 3-step financial goal-setting process that’s been working really well for me:
Step 1: Zoom out, then break it down.
The first thing I do is to zoom out to a specific outcome I want and then break down that big picture into a series of smaller goals that’ll help me get there.
Once I’ve got these baby goals set up, each and every financial decision I make throughout the year (like my income, budget, savings rate, asset allocation etc) has to revolve around them.
Step 2: Write them down.
A study by researchers at Dominican University in California confirmed that putting your specific goals for the future down in black and white (or multi-colour if you want) will make you far more likely to be successful than those who have unwritten or non-specific goals.
I typically get my goals down on a Google doc, but any other note-taking tool will work as long as you’re comfortable with it.
Be sure to use something that’s password-protected if you’d like to keep your goals private.
Step 3: Make them SMART.
Most goals benefit from being built using the SMART framework, and financial goals are no different.
Smart goals are:
Having a specific number in mind that you want to hit will give you something to be laser-focused on.
Having a goal that’s measurable will give you a means to track your progress and consistency. For example, socking away RM500 per month for 10 years to buy a new car.
This is where your detailed plan will come into play: The better you know the ‘how’ the execution will be done, the more certain you’ll be about achieving it. For example, working freelance gigs to earn more cash to earn an extra RM1,000 per month to stash in your emergency fund.
Your goals have to be within reach based on your income, situation in life and willingness to ‘do’ what it takes to realize your goal. Increasing your savings rate, for example, will likely need you to reign in those impulse purchases that are adding RM500 to your monthly credit card bill.
Just as important as being specific, measurable, achievable and realistic is making your goals time-based so that you have a set timeframe for hitting them. Example: Reaching the 50% mark for your emergency fund within 12 months.
Your Financial Goals And Budgeting
When I first decided to bring order to my financial chaos and put down the goals I wanted to achieve, the first thing I did was create a budget.
Sure, you can probably get by without one, but for me, having one in place that would guide me day-to-day was like making my bed every morning — it just made me feel more organized.
The road to creating my monthly and annual budgets were eye-openers themselves: Tracking my income and expenses gave me a detailed glimpse into exactly where my money was coming from and going, and set the tone everything else that came after, like my financial goals.
You’ll find, as I did, that having solid monthly and annual budgets in place will give you a greater sense of control over your money and a clear glimpse of your path to reaching the financial goals you have in mind.
Even better, consider this: Make your goals a part of your budget.
My 2022 Financial Goals
I wrote previously about how unnerving it’s been to not have a monthly salary coming in, and the truth is, I’m still adjusting to my new reality.
Yes, I was prepared for it, but having worked for a monthly paycheck for most of the last 20 years, living without one feels….strange.
Thankfully, I’ve got investment income to keep me afloat, which does give me a sense of security.
And because of this, I’m now able to add the element of risk to some of my financial goals.
In 2022, they are to:
1. Rebuild my active income via various content creation projects. My initial target: RM60,000 per year over the next 12-24 months and then scale up from there.
2. Invest up to RM10,000 into a combination of bitcoin and etherium (I’ll likely go for a 50-50 split) by dollar-cost-averaging in over the next 12 months. My plan with crypto? Simple: To just HODL.
3. Invest at least RM10,000 into an S&P 500 index-tracking ETF over the next 12 months for long-term growth.
4. Invest at least RM10,000 into a Nasdaq index-tracking ETF over the next 12 months for long-term growth. I might buy more of both ETFs if and when there’s a significant dip as the U.S. Federal Reserve hikes interest rates.
5. Replacing my scarcity mindset around money with an abundance-based one.
As you can see, the success of goals 1# and #2 are not guaranteed.
Goal #1 will be built purely with knowledge, blood, sweat and tears. Is it possible that I’ll fall short? Very possible, but worth shooting for now that I have more time and mental capacity to focus on it.
Goal #2 is, in my non-finance professional opinion, the riskiest of all and I have to admit, is driven purely by FOMO.
Is it possible that I’ll lose it all with crypto?
I don’t know, but it’s a gamble I’m willing to take since I have all my chips (ie my 3-year cash cushion, a fully-loaded emergency fund, medical insurance and investment income) in place and no debt to worry about.
Goals #3 and #4 are straightforward and will just require me to keep my eyes and ears open. I’ve saved up the necessary cash reserves that I can deploy when I’m ready, so there doesn’t need to be an accumulation phase for either of these goals.
Goal #5 will be just as challenging as goal #1, and will involve questioning and testing many of the scarcity-based beliefs I’ve had around money for the longest time.
Additional Tips And Resources
1. Automate as much as you can.
Setting up automatic payments or transfers to fund your investments and emergency fund (or your various sinking funds if you have any), as well as pay your bills takes away the headache of taking care of each task manually at the end of every month.
Relying on automation instead of willpower will also make sure your funds are squirreled away to their respective ‘jobs’ before you get a chance to spend it in a moment of retail weakness or forget to pay your bills.
This is how I invested and grew my unit trust and stock portfolio — both of which are now major sources of passive income for me — for well over a decade.
Your bank should have this service filed under ‘standing instruction’, ‘e-standing instruction’, ‘recurring payment’, ‘auto funds transfer’ or ‘auto debit’.
2. Visualize your success.
This may sound like new-age woo woo, but it has worked for me. You don’t need anything elaborate like weird rituals or crystals to make it happen.
Just find a quiet, peaceful place to sit in for five minutes while you imagine reaching your goal and what it would feel like in all its detailed glory.
Seeing yourself already in a situation that you want to be in can be a powerful motivator for your subconscious by reducing the noise of disbelief that often stops us from going after our dreams.
3. Set behaviour goals.
Focus on behaviours you can do every day that will help you get closer to your goal.
For example, if your goal is to save RM500 a month, you can consider getting into the habit of prepping your own lunch for work or earning more cash through a side hustle.
If you want to make investing a monthly habit, add your set amount into your budget so that you go ahead and ‘pay’ for it at the end of the month without delay or indecisiveness.
The more reaching for your financial goal becomes a habit, the less you have to think about it.
4. Use a budget-tracking app.
Your financial goals and budget go hand-in-hand, and the best way to keep track of your cash flow is with a budgeting tool that you can take with you wherever you go.
5. Plan with a compound interest calculator.
Nothing gets my financial goal juices going like seeing what’s possible when I let compound interest work its magic on my investments.
It’s a huge motivator to make consistent investing a habit.
To visualise the results of compound interest on your own portfolio, use a calculator like the one at calculator.com.my.
6. Use a financial goal planner.
The better organised your financial goals are, the more clarity you’ll have around how to go about achieving them.
A great way to do this is to organize them in a spreadsheet , journal or The Ringgit On Fire Financial Goal Planner that I send to all my email subscribers.
Recommended Tools & Resources
*Note: Some of these suggestions contain affiliate links, which means that I’ll earn a small fee if you decide to use them. Using these links won’t cost you anything extra, but it’ll allow this blog to earn some money. If you use them, thank you 🙂
StashAway puts my cash to work by diversifying it into baskets of global exchange-traded funds (ETFs) safely and easily according to my risk appetite minus the freakishly high sales and management fees that come with unit trust funds. Sign up here to save 50% on management fees when you invest up to RM100,000 for your first 6 months.
Got financial goals in mind but don’t know how to make them happen? Use the very same step-by-step process I do to give my goals the structure and clarity I need to take them from idea to reality. Get your copy of The ROF Financial Goal Planner here when you sign up for my newsletter.
THE MILLIONAIRE NEXT DOOR by Thomas J. Stanley and William D. Danko
This is the very first book I ever read about money, and one that opened my eyes to what it really means to be wealthy and how the true rich (ie people who have a lot of money and are smart with it) make, manage and use the green stuff. You can get your copy here.
YOUR MONEY OR YOUR LIFE by Vicki Robin
I consider this mandatory reading for everyone, no matter where you are on your financial journey. If you’ve got questions about how to develop good habits around tricky subjects like debt, earning, spending and your relationship with money, this book’s got the answers. You can get your copy here.
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Disclaimer: Everything on this blog is published for informational, personal point of view and entertainment purposes only and is not a substitute for professional financial advice. Please consult a certified financial planner for advice on your own situation.