Author: Adino

How To Set Financial Goals

(Originally published on my frugal blog on June 3 2009)

In my previous post I pointed out to you how we must have financial goals before we even think about investment.

Today I’m going to show you how to set financial goals for your own life.

What Are Your Financial Goals?

Now, you may ask me what goals qualify as financial goals. The answer is: who do you want to be, and where do you want to be in the future?

Do you want to be someone who is financial independant, someone wealthy, sponsor of your children’s education, a philanthropist, someone who retires in Langkawi island?

Then there are several major events in life that will cost a lot of money. Examples are wedding(s), buying property, buying cars, children education, and retirement.

All these should be part of your financial goals.

Setting financial goals is as simple as following the SMART acronym.

SMART

The SMART way to set financial goals (or any goals for that matter) is to define goals that are:

  1. Specific
  2. Measurable
  3. Ambitious
  4. Result Oriented
  5. Time Bound

Specific

I wrote a bit about being specific in the previous post. To be specific means your financial goal is clear, unambiguous and targeted.

An example of a specific financial goal would be:

Have enough passive income to support me and my wife’s retirement.

Measurable

A measurable financial goal is one which you can measure in terms of amounts, quantities or quality standards.

Adjusting our previous example to become measurable would be:

Have RM8,000 monthly passive income to support me and my wife’s retirement.

This amount is just a number I picked out of the air, of course.

How will you know the exact amount to put in your goals? For example, how will you know how much retirement income you need when it is so many years ahead?

It’s difficult to estimate sometimes. You can use my future value calculator to assist your calculations.

Ambitious

The sky is the limit when it comes to setting financial goals. Try to set goals that are challenging, but at the same time be realistic.

Set a balance between something that is out of our comfort zone, but not so difficult that it becomes demotivating.

Let’s make our sample goal a bit more challenging:

Have RM10,000 monthly passive income to support me and my wife’s retirement.

Result Oriented

Your financial goals should be meaningful and productive to your life and those around you.

Do not set goals that have little or no value.

Time Bound

A time-bound goal means you have to set a deadline for yourself.

This is important, because this will determine how you can plan to achieve those goals.

Having a time-bound financial goal can also help to overcome procrastination.

A final adjustment to our earlier example will be:

Have RM10,000 monthly passive income by the year 2030 to support me and my wife’s retirement.

Your deadline can also be adjusted to be more ambitious.

Milestones

The next thing I like to do after writing down my financial goals is to define milestones for each of those goals.

For example:

2015: RM2,000 monthly passive income

2020: RM4,000 monthly passive income

2025: RM7,000 monthly passive income

2030: RM10,000 monthly passive income

This has two advantages. First, it can help you to check your progress as time goes by. Second, a seemingly impossible task can be broken down into smaller achievable steps.

I like to break it down further into a 5-year plan, a plan for this year and then a quarterly plan.

If you can’t find a way to set milestones for your financial goal, then your goal might have to be revised to become measurable or time-bound.

Review and Adjust

Periodically take a look at your financial goals to see how you have progressed.

If you are on track, imagine how good you will feel! If you are falling behind, perhaps it’s time to make extra effort.

I leave it to your personal preference and creativity to measure your progress and motivate yourself.

Financial goals are not set in stone. There is nothing wrong with changing goals when your life situation changes.

Just make sure you are not changing the financial goal because you are giving up.

Doggy Bag

You have seen how easy it is to create or improve your financial goals the SMART way.

I have even shown you how you can break down your grand master plan into manageable milestones.

Now I leave you to work out your financial goals. It would be best to write them down somewhere instead of keeping it in your head.

Once you have your financial goals in place, THEN you can start to plan how you are going to achieve those goals.

That’s where financial planning and investments come into play.

Photo By: marmit

Transformers Generation 1

I’ve been watching late night reruns of the Transformers on Astro channel 611 for the past few weeks.

Somehow, the cartoons don’t looks so cool any more.

Nostalgia

It’s strange how I can still remember name of the characters after 20 years. I have even forgotten some of those characters existed!

I see Ramjet, SeaSpray, PowerGlide, Omega Supreme, Grimlock, the Insecticons…

So it is with a warm feeling of nostalgia that I remember the cartoon.

My mind drifts to memories of my childhood, of playing Transformers and watching cartoons at my grandmother’s house. I remember playing with my cousins.

I even remember my old Transformer toys.

I remember how I used to drag my parents to the toys section in the mall to stare at Transformer toys, wishing, just wishing I could have all the toys I want.

Nowadays I drag baby Rachel to Toys R Us, pretending to get toys for her. But when nobody’s looking, I stare at the Transformer toys, wishing, just wishing I could have all the toys I want.

Cracking the Illusion

Then I start to see the imperfections.

I see how the animators got a bit lazy. If you observe, you won’t see all the transformers transforming. The camera zooms in to one robot transforming. Zoom out, and everyone has transformed.

You also notice “re-used” animations. Why do all the poses look so familiar? Why do they walk the same way? Why are transformations viewed from the same angle?

Once I even saw StarScream change colour from red to blue, back to red between shots.

I understand that these are normal tricks of the trade used by animators in the old days when everything was drawn by hand.

But this wasn’t the Transformers I remembered. My memories looked much better than this. My childhood visual memories seem to be like high definition, and what I see is like a 16 bit GIF animation.

Why? Why? Why?

In the second season, the transformers have moved into a city. There, they get involved in mundane things like foiling car thieves.

And then you watch a scene where they have a battle inside a shopping mall.

In one episode, things get philosophical when the transformers are accidentally transported to an alien world where they become toys for an alien boy. In the end, the Autobots fly back to earth in one of the boy’s toy rockets.

I wonder how many millenia it will take for them to arrive back on earth, on an inter-stellar flight with a chemical rocket.Maybe they modded it with hyperdrive.

Then there is the classic question… why don’t you kill each other if you hate each other so much? Why spend precious seconds gloating rather than make the killing blow?

Where does Prime’s trailer go when he’s in robot form?

How do the transformers grow and shrink?

I Still Like Them

All these minor issues aside, I continue to enjoy watching the Transformers cartoons. At the very least, they bring back some nice memories for me.

The imperfections I mentioned are only cosmetic and surface layer. The core concept of robots that can transform is still very interesting, proven by two blockbuster movies.

After all, nothing can be perfect, and in all fairness to the hard working people who worked on this, they did get better as their success (and budget) increased.

Technology was also a limitation, and we cannot expect old cartoons to look like our modern cartoons. After all, even movies were in black and white in the old days. But we can’t say that those black and white movies were no good.

It may seem like I’m contradicting myself, but I’m just trying to view the topic from both sides.

+Level Up!

INT + 1D6, WIS + 1D4, STA -1D24 -6, DEX +1D21, STR = 0

*blink blink* What just happened?

I think I’ve just leveled up as a geek. I can’t believe I wrote a 650 word post on the Transformers.

And threw in a durian joke somewhere, too.

P/S: I’m currently catching up on M.A.S.K. re-runs at YouTube!

Why Do You Invest? Setting Financial Goals

(Originally published on my frugal blog on June 1 2009)

“Why do I save money? Why do I invest? It’s hard work!”

“Sometimes it is so hard that I just feel like giving up. Why do I have to ‘suffer’ today and live without the things I want?”

“Why do I have to ‘sacrifice’ so many things when others seem to be enjoying life?”

“Am I doing the right thing?”

Do you ever find yourself feeling the same way, or asking the same questions?

You’re not alone!

The simple answer is, we invest and save to achieve our financial goals!

Now let me ask you, what are your financial goals? Do you even have goals?

Financial Goals

Before you even spend a single cent in investments, you must determine what your financial goals are.

A financial goal or a target is simply this. Who and where are you going to be in the future?

Now, many people go on with life without really planning or setting financial goals. If you ask them what their financial goals are, you will probably get these answers:

  1. I want to be a millionaire
  2. I want to own a house and two cars
  3. I want to retire by the age of 45
  4. I want financial freedom
  5. I want to send my children overseas for their education

What’s wrong with these goals? These are in fact noble and well-intentioned goals.

But these goals are not specific enough!

Being Specific

Imagine if you wanted to start a business, and needed investors to provide some start up capital. When they asked you for a business plan, you reply with:

  1. The business will make millions
  2. The business will expand to two outlets
  3. You will get your money back with a lot of profits

Do you think anyone will invest? No, for the simple reason that you are not specific enough.

How many millions are you talking about? 1 million or 10 million? When will the business expand to two outlets? In 2 years or 20 years? How much profits are you talking about? And what’s the ROE?

Goals and Investment

So what has setting goals got to do with investment? Everything!

(I seem to be using the exclamation mark a lot today!)

You can only invest effectively and wisely once you know what your financial goals are.

Let me use another analogy. If you wanted to go to your neighbour’s house, you will probably walk. If you wanted to go to the city you would drive or take public transportation. If you wanted to go to Hawaii, you would have to fly there.

But if you didn’t know where you wanted to go, how would you know which form of transport to take? Will you choose the most popular, follow what the rich people are using or pick the one that is hot on the news and media?

Different investment vehicles have pros and cons, and which one you use will depend on your specific financial goals.

This is why there can never be one investment that suits everyone.

Taking Goals Seriously

Another aspect about the financial goals is how much priority you give to achieving your goals.

If we don’t take our goals seriously, then we will NEVER achieve them.

How many New Year’s resolutions are broken because there was very low commitment or lack of motivation?

To really achieve your financial goals, you have to first set goals that can motivate you. Make sure these goals are constantly on your mind. Every financial decision you make should reflect these goals.

Financial Planning

After you have set your financial goals, THEN you can start to plan HOW you are going to achieve that goal.

This is where financial planning comes into play.

I will talk more about setting goals in my next post, and more about financial planning in subsequent posts.

Doggy Bag

Today I’m going to introduce a new feature called the doggy bag. Doggy bags are used at restaurants when we can’t eat and digest all the food at once. We take the food home in a ‘doggy bag’.

In today’s post, I will leave you with something to take away.

Think about your financial goals. If you have not seriously put some thought into it, spend some time really thinking or discussing with your spouse.

If you already have financial goals, think about the last time you actually took the goals seriously.

[tags]Financial Goals, Saving, Investing[/tags]

Photo By: Svilen Mushkatov