Last Updated on August 13, 2021
Have you been living from paycheck to paycheck? If there’s something we could learn from last year, it’s to save up for rainy days — you’ll never know when another pandemic such as Covid-19 could hit.
Setting and achieving your financial goals is not easy, but with some due diligence, it is possible to work towards your dreams.
What are financial goals?
Financial goals are the plans you have for your money in the next phases of your life. It could be in the form of short-term goals such as this month’s budgeting, or something more long-term such as investing for your retirement.
Financial goals are important because they change the way you view your money and you can be more aware of how your every decision can affect your financial health.
In any case, your goals should give you motivation and here are 5 steps to go about putting them into action:
Calculate your net worth
Your net worth provides an indication of where you stand financially, and how close you are to achieving your financial goals.
Your net worth is the dollar amount of your assets after subtracting all your debts. You can calculate your net worth by deducting your liabilities from your assets. This simple calculation will let you know if you have enough assets to account for your financial goals after subtracting the liabilities. You can even use a net worth calculator to work out this sum.
After calculating your net worth, make it a habit to keep tabs on this regularly. There are different ways to do this — while some people prefer using spreadsheets, others prefer financial planning apps.
Protip: If you like handling money through the convenience of your mobile phone, download the Planner Bee app to track your expenses and assets across paper and digital statements.
Determine your priorities
There is probably an endless number of goals on your list, but it would be a tall order to tackle all of them at the same time. Know your priorities, so you can work out an actionable plan to attain these feasibly. Begin by shortlisting the short- and long-term goals that most matter to you at your current life stage, and concentrate on them.
However, don’t completely forsake the other goals that are not on your priority list. Instead, make it a point to review your other goals every quarter. By then, you might have already checked off some of your goals or have gotten a pay raise, so you can progress to your other priorities.
Cultivate new habits to achieve goals
Take 2021 as a fresh start to cultivate new habits. Start from making saving a habit since habits are more intuitive to adapt to.
There are hacks in everyday life that you can make use of, for example:
- At work: Packing your own lunches.
- Shopping: Have a shopping list on hand and make the purchases during sale seasons where you get to save more, or look out for coupons that offer cost savings.
- Travel: Traveling during off-peak season, so you can save on airfare and accommodation.
Through these habits, saving should come more naturally to you after a period of time, which will gradually help you achieve your financial goals. Ultimately, the takeaway is to kickstart the action that leads to savings, rather than the actual amount saved. The latter will make you feel like what you’re doing is a sacrifice, making it less sustainable in the long run.
Know the specifics of your goals
Be as detailed as you can when it comes to goal setting. If you are not working towards any specific goals, chances are that you will be likely to spend more than you should.
Instead of saying “I want to retire early”, you should aim for a more specific action plan that is measurable, e.g. “I want to save S$2,500 a month over a span of 35 years so I can retire early”.
Here’s a simple example of a goal-setting exercise:
|Goal||Timeline||Amount Needed||Monthly Savings*|
|Early retirement||35 years||$1,050,000||$2,500|
|HDB downpayment||5 years||$80,000||$1,333.33|
*Assuming that this amount is purely set aside for saving purposes, with no investments made.
Keep track of your milestones
If you don’t take note of your progress, then you will just be shooting in the dark. This step is important to let you know if your saving rate is appropriate and whether you are a step closer to your target.
Once you have defined your goals, set milestones and track them to understand where you are at. For example, saving S$100,000 by the age of 30 might sound unfeasible, but breaking them down into smaller, achievable milestones can spur you on.
Having milestones and keeping track of them allows you to stay motivated and enjoy the feeling of making progress along the way.
The best time to start is always now
Stop procrastinating and start doing!
If you want to achieve what you want in life, there’s no better time than now to get started. Begin on a clean slate this new year, and gain better financial freedom with your financial goals!