In financial management studies, an effective financial goal should be 5 features that can be easily remembered as S-M-A-R-T have. In the following paragraphs explain all five characteristics:
We might think that they financially free, but you know what it takes? This target is appears to be too general. Our goal must be specific so that we can focus on any particular area of financial planning and easy to manage our own expectations. Specific purpose usually has only one outcome
For example, aim to invest RM200 per month in unit trust and accumulate at least RM2400 a year .; or spend within our budget every month. Those targets will have different outcomes, but when combined, they will ensure that our cash flow to be healthy. For each specific objective is achieved, we get closer to financial freedom.
we would work very hard, but how do we know if our goal is reached? Therefore our financial targets must be quantifiable.
For cases we want to invest and accumulate RM50,000 in two years and the progress can be easily quantified by looking at our investment account statement.
In fact, we should be able to measure whether progress in achieving the target as the calculation of the net present value debt-to-income ratio and assess return on investment ( ROI) and our current insurance. It is good if we can keep a diary to view the current schedule.
Many people are affected by the ‘Law of Attraction’ and believe that ‘nothing is impossible’. However, these goals are realistic and achievable? It is important to know whether the target is within our capabilities and logical norm.
For example, if your goal is to reach RM1 million in one year by only investing RM1000 per month each scheme. How likely can this be achieved? In fact, such a fund would require very high ROI within a short duration and often comes with a very high risk. You could easily lose your capital.
Most important, we should not stretch us to reach unrealistic goals. This is to avoid frustration over the failure which ended in great disappointment.
We want to achieve a goal, because something would get in return or else nobody will work hard. While working toward goal achievement, we must be sure to be on achieving the result and it is important to our lives. In fact, it should be useful and enjoyable.
For example, a man wants to invest his money to collect education fund for his son in 20 years. In the future, this goal will be worthwhile, because his son to enroll will be in higher education.
However, the reward in any form, such as material, financial, relationship and spiritual.
5) -Time bounded
We have plenty of time to achieve our goals. It can reach in the short term, medium term or long term, depending on the type of targets. Timeliness has been an important aspect in life. Therefore, we need to assign a time frame to avoid delay. It will be good if we can set up a schedule for everything that needs to be done.
For instances, saving for retirement would need many years because it is a long-term planning and large sum of money involved. Therefore, planning for retirement would be unrealistic in the short term (1-5 years), unless someone is willing to have huge bet on this.
In short, time is invaluable because it gives opportunities for development and make greater achievements. Therefore the wise man always said, ‘early start and stop procrastinating “
An effective financial goal would always be this smart features .; Specific, Measurable, Achievable, Realistic, reward and limited time. This is to ensure that our objectives are meaningful and get us closer to financial freedom. Good luck in your goals.