How to Set a Financial Goal and Take Control of your Money
Previously I shared with you how you can do a financial self-assessment so that you can know where you are now financially. This is the most important and basic step that everyone of us must take before we make any financial goal.
Through the financial self-assessment, you will find out your financial problems and hence set a goal and plan to overcome them. I think this is the main reason why we must set a financial goal. A financial goal must be a goal that can improve our finance level or solve our financial problem. It is hard to make a good financial goal without knowing what kind of problems you have right now If you haven’t do the financial self-assessment, you can read my post : Do you know where are you now Financially and find out the steps that you can do so.
Taking Control of Your Money by Setting a Financial Goal
Congratulation if you knew your current financial status. So let’s move on to set some goals and start taking control of your money. Below are some of the tips that I would like to show you on how to make a financial goal.
- Decide what you want. First you must decide what you want to achieve. Now you know your financial status and understand your financial problem. You should know what kind of financial problem and weakness that you want to cover. Just ask yourself what you want to improve and what kind of end results you want to achieve in next week, next month or end of the years. If you feel hard to make the decision, maybe you can read my article about the 6 financial levels. This article will tell you what kind of financial levels that available for you. So you can spend some time and then choose 1 that you want to achieve.
- Which Problem to solve first. I suggest that your first target should be those problems and weakness that you have found from the self assessment test. If you found that you are paying too much of debts, then getting out of debt should be your first choice. If you are having a negative balance at the end of each month, then you have to control your expenses and make it back to positive. Or if you found that you are suffering from the high mortgage payment or car loans repayment, then you should consider whether you change your car and house or look for second options to drop down the payments.
- Make a plan. You need a plan to succeed in anything. Now you know what you want and select the financial levels you are targeting at. Then you also know your current problems and etc. So with this 2 important information, you can start compiling a plan to solve your financial problems and move forwards to your goal. For example, I want to achieve financial freedom for my life. Then before achieving it, I have to pass 2 levels – financial security and comfortable. Of course, if you are in debt, then you have to make your balance break even first before those 2 financial levels. In financial security, we are looking for “security protection” on our finance. So in this level, we must prepare our savings, emergency funds and last but not least, good money management system that will prevent us from the financial disaster. After that, we will look for business and investment opportunities to build up our financial comfortable level. In financial comfortable, we are living comfortably with excessive cash from business, investment and our job. So with this money we can start building our asset empire and achieve financial freedom. This is just an overlook on my plan to achieve financial freedom.
- Take 1 action at a time. Please make your plan simple and take 1 action at a time. People always fail because they always try to take a big step at a time. In most cases, this will make you feel overwhelmed and stop taking action. I have this experience before too. In order to solve this problem, I found that making a plan is a good solution. In my plan, I always list down what I want, what is my current strength and weakness and finally write and list down the small steps 1 by 1 in my plan. After that I just follow my plan and I will achieve what I want. The power of a plan with some small steps is it can let you feel easy. Once you feel it easy, your mind will be clear and you will take action easily.
Last But Not Least …..
Please set a financial goal that you strongly believe that you can achieve. You will be lack of motivation if you set a financial goal that is too high for you. For example, if you set a goal to be a millionaire in next year. If you believe it then this is a good goal for you. But if you are not, it will block you instead of motivating you and move forward. So please set a financial goal according to your ability which you believe you can make it.
Good Luck
Harrison Loke
A dreamer who chases a Goal
5 Financial Goals that You can Set For Your Life
Year 2008 is around the corner and we are now in the busy December. We are busy in December because we have to prepare for the Christmas Day and also the New Year Celebration. Some of us might busy for the year-end holiday. A lot of shopping and planning have to be done within this month.
Besides shopping and holiday planning, there is actually a process that we cannot miss out. It is Goal Setting for the coming up 2008. You can set any goals for 2008 but I would like to remind you to set a financial goal for yourself so that you can take some serious actions for your personal finance.
Don’t know what to set? Don’t worry, in order to assist you on this, I have categorized the top 5 financial goals that you can set for your life. Here they are:
Do You Know Where You Are now Financially?
This is an article that is talking about the financial self assessment that will let you know where you are financially. This is the most basic step for our giant financial goal. So let’s see how we can do it.
When comes to money or personal finance, people will think that the main problem that they are having now is not enough money. They just blame and think that all the financial problems are because of not enough money. So in order to solve the problem, they just keep finding the ways to make more money.
However making more money does not solve our financial problem. Good financial planning and money habits are the way to solve our financial problem. Without them, even though you make millions of dollar, the same financial problem will still follow you.
There are many ways to get started in financial planning and people are confusing with it. However, it will be easier to make the plans if we know where we are now financially and understand all the strength and weakness that we have in our finance. This is why a simple financial self assessment is very important and we must make it as the first step before we make any financial decisions or plans.
Financial Self Assessment
Now let’s get started with the financial self assessment so we can understand where we are now financially. I’m going to show you the financial assessment that I learn from The Cashflow game, a product from famous book author, Robert Kiyosaki. We will use the same theory of financial statement in the game to do our self assessment. This is the simplest and easiest to understand financial statement that I ever read.
Without further ado, here are the steps for financial self assessment:
- Collect all the data. First you need to collect all the data such as your incomes, expenses, bills, bank statements, assets, liabilities and etc. Yes, it might be troublesome to do so, however, don’t worry and just do it. It will be getting easier as you go on and eventually it will be your habit one day.
- List down your data properly. Now please list down all the data you have collected in a piece of paper or type it out in your excel file. There are actually 4 kinds of main categories: Incomes, Expenses, Assets and Liabilities and all you have to do is categorize all your data according to the categories.
PS: According to the book Rich Dad Poor Dad, Assets are something that put money into your pocket and liabilities are taking out money from you. So please use this concept to determine your assets and liabilities here. - Put a value and add them up. Now give a value to all your data. List your income, expenses, assets and liabilities and give a value to each of them. After that add them up and get a total figure for each category.
- Analysis over the figure. Now you should have all the needed data listed properly. Then we can do some calculation or analysis the figure and find out what is the “health level” of your finance.
Analysis that you cannot miss….
So with the data you have right now, we can go through some calculations and analysis to find out how wealthy you are right now. Below is some of the analysis that is important for you:
- Net Monthly Cashflow – First, you deduct the total expenses from your total income. The balance will show you how much money you left each month. This money is very important as it is the extra money that you can use to build your emergency funds, savings, investment and etc. Of course, your job is trying your best to make this number increase positively. To do so, you must learn how to increase the income and decrease the expenses or manage your money wisely.
- How you make your income – How you make money? Through a job? Through a business? Or do you have incomes from business and investment. No matter how you make money, it is quite dangerous if you depend on one kind of income to survive. What about you loss the income? Can you imagine this? So your target is trying to find more income source or build multiple income source of income. For example, while working for somebody, you can start a part time business or invest your money in real estate and generate extra passive income.
- How you spend money – Are you paying multiple credit card debts? Do you own a car that you cannot afford right now? Do you spend so much money to buy something that not really necessary? From the expenses column, you will find the answers. Like what I said just now, it is important for you to learn how to spend and manage your money properly. Make money and spend money have to work side by side. It is risky If you make $100,000 per month and you spend $99,999 or more.
- Assets VS Liabilities – Which one has more value? This is the first question that you must ask yourself. Well, I can say that there are plenty of people have more liabilities than assets. However, for a good and healthy finance, you must own more assets than liabilities.
- Paying too much of debts – Now look at your expenses and liabilities sections, Are you paying too much of debt? If you are paying more than 20% of your income for debts, then you are having too much of debts and you must figure out a way to reduce it.
Conclusion
The purpose we carry out a financial assessment is we must know where we are now financially. If we have too much of debt, then we must make a plan to pay them off. If we spend more than we earn, then we must pay attention on our spending habits. If we have more assets and high income, then we just carry on what we are doing now or even increase the speed. Different condition will have different kind of actions plan. This is why I said financial assessment is the basic step for our big financial goals.
