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Goals are critical in the financial planning process. After all, what is the point of saving if you don’t know what you’re saving for? And it’s great you’re paying off that debt but do you have any idea when you should have it paid off, and even if you do, how do you know if that’s good or bad?


This is where setting goals comes into play. Without financial goals you may be doing all the right things yet still have no idea what you’re trying to accomplish. When you aren’t following a specific action plan and trying to reach finite goals you often end up floating aimlessly over the years just carrying on as usual. It’s still better than doing nothing at all, but many studies have been done over the years that show those who take the time to define clear goals are far more likely to succeed in reaching them. So, stop telling yourself that you just want to pay off  your debt, or put money away for retirement, or trying to make a little more money at your job. In this chapter we are going to learn how to set financial goals using SMART rules and how we can achieve them. SMART Rules stand for Specific, Measurable, Achievable, Relevance, Time bound.

What is a Financial Goal and How Are They Different from Dreams?

A financial goal is something you intend to achieve. A financial dream is something you hope to achieve. This doesn’t mean that your financial dreams can’t come true, but usually your dreams are a little more lofty and not all that likely. Dreams start with “I wish” and goals start with “I will.” You achieve your goals by setting a specific deadline, dollar amount, or task and then create a plan that you can follow to completion.

How Your Values Determine Your Goals

Your core values and fundamental beliefs about what’s important to you will provide the basis for your goals. This is why no two people have exactly the same goals. Sure, everyone wants to save money and build wealth, but how much, how fast, and for what reasons will be different from person to person. Others will value being debt-free over an early retirement. Some will want to focus on buying a home and starting a family instead of traveling and so on.


Take a minute to think about the things that are important to you and write them down on a piece of paper. For instance, if I were to write down a few things that are important to me it would be my family, my investment and charity.  These are the things that make me happy.  I can then begin to start planning some concrete goals that reflect these values and will ultimately help me achieve them. On their own they are far too broad to actually be goals themselves, so that’s why it’s important to take the next step.


Putting together your Financial Goals

Setting goals is a process and each one requires a few key pieces of information in order to be effective. The steps in creating your financial goals are:

  1. Set your financial goals using the SMART rules with a specific deadline for achieving the goal

  2. Differentiate your goals into short term, medium term and long term

  3. Prioritise your goals

  4. Achieving your goals using a spreadsheet

  5. Monitor your progress.

Step 1: Setting Goals using SMART rules


Your goals should be specific not general. They should contain detailed information and should not leave room for further questions. “I want to retire rich” is a very general goal.  “I want to retire with RM3 million at the age of 65 years old.” is a more specific goal which gives you a clear picture.



Your goals should be measurable in terms of “How many” or “How much”.   A rough idea is not enough. A lot of people say “I want to buy a big house”. It’s a great thing to dream of a big house, but at some point you will have to decide the actual size, how many rooms and when you want it.  Not having a clear view means you have no idea of how much it will cost and then you won't be able to save for it properly. “I want to buy a 4 bedroom house in 5 yrs” will mean you will know exactly how much you need to save per month so that you can achieve that goal.  You should be able to track your goal which means the goal is measurable.


This means that your goals should be achievable given your current situation. When financial planners start working with a client, one of the major issues is targeting unrealistic goals.  Just because you are hiring a financial planner it does not mean that he is a magician and will somehow create a strategy for you.  If you are saving RM500 per month, please do not target “A bungalow house in 5 years time” as one of your goals because it’s not possible. If you set unattainable goals you will not be able to define how to achieve them.


If you are unmarried setting a goal such as “I want to have RM300,000 cash for my children's education fund in 15 years time” makes no sense.  It is not aligned with your current life stages.   However, if you are single but you intend to adopt a child and become a single mother, then that’s a different story! Besides having goals relevant to your current life cycle, you have to make sure your goals are very much what you wish for in life. For example, ever since I was young I have dreamed of travelling around the world to experience different cultures.  Hence, my personal financial goal is “to set aside RM200,000 at the age of 50 to begin my world tour!”  As you can you see I can turn my dream into a reality through committed plans in savings and investment.

Time Bound

Imagine your goal is “I would like to buy a RM60,000 car to drive to work”.  When do you need the car?  In three months or three years? By putting a date on your financial goal you can calculate how much time and how much savings per month you need to accumulate. For example, if you save RM1,000 per month, in 6 months time you will have enough  for the down payment on a Proton Preve! It’s important to set a time line so that you have a clear idea of how long it takes to achieve your goal.

Step 2: Classify your goals into Short Term, Medium Term & Long Term

Now you have learned the techniques in setting financial goals, let’s turn to the different types.

  • Short Term Goals – goals that can be achieved within one year

  • Medium Term Goals – goals that can be achieved within 2 to 5 years

  • Long Term Goals – goals that are achievable in more than 5 year

Step 3: Prioritise your Goals

Most of us have multiple financial goals but limited resources. This often means we can’t fully fund every single goal all at the same time. That’s ok! Don’t get discouraged; take time to prioritize so you are putting your time and money to work in the most efficient manner possible. Once you have your goal worksheet (Table 2.1) filled out you may want to label each one as either a long-term or short-term goal.


Once you’ve broken down your goals into long and short-term you can start to prioritize. Usually it’s best to take a hard look at your short-term goals first. That’s because shorter term goals tend to deal with more pressing financial concerns such as getting out of debt, building an emergency fund, or taking care of something urgent. As you can probably guess, it wouldn’t make much sense to fully fund your retirement account if another goal is to create an emergency fund and you don’t have a penny in savings. So, focus on your short-term goals first and put most of your effort into those that are most important.

Then you should begin looking at your long-term goals. Now, this doesn’t mean you should put your long-term goals on the back burner while you tackle all of your short-term goals first. Not at all. Instead you should just be putting a little extra money or time into your short-term goals while cutting back on your long-term goals for the time being. Remember, even if one of your goals may be something 30 years down the road you still want to maximize all of the time you have. So although you may not be fully funding that goal while you’re focusing on paying off your credit card debt in the next two years it might not be a good idea to abandon that long-term goal completely. It's up to you to prioritize what’s more important to you and make sure you’re maximizing your efforts.

Let's Practice!

One of the easiest ways to start developing your goals is to use financial goal worksheets. Below is the worksheet for practice.

  1. List all your short term, medium term and long term financial goals.

  2. Prioritise each financial goal.

  3. Determine your target date to reach each goal.

  4. Give each goal an estimated cost.

  5. Plan how to achieve your target.

After you have identified your financial goals and prioritized them accordingly, the next crucial step is to achieve them. You need to keep track of your financial goals constantly. All you need is persistence and determination!

Table 1: Example of Financial Goals

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