How to set your financial goals

As I’ve mention at my previous article, I’ve set my goal to retire before 45 years old. To reach that target I need to set financial goal. How to set financial goal? Let’s me share with you.
Setting financial goals, we need pay attention to what you value and believe in life. Without knowing what is important personally, it will be difficult to set satisfying goals. It is important to value and belief the financial goals to achieve.

Let’s read my guidelines..
Identify and write down your goals ( put a short term, medium term and long term). This is example of my goals

Short Term (less than 1 year)
• Buy an auction house (for investment)
• Save a down payment at least RM6,000 (as I want to buy a house below RM60,000).
• Write down the location and house type to buy
• Buy and advertise for homestay
• Full settlement loan car
• Saving 10% from salary. If it could be done in 1 year, my saving will be at least RM4,000.
• For down payment, I need to save another 5% from salary and do refinance to my current house
• Get another source of income ( blogging, write ebook, investment)

Medium Term (1-5 years)
• Buy another auction/subsale house (for renting)
• Save a down payment at least RM10,000( as the future house will increase)
• Increase company capital. Target capital is around RM10,000/ Hire worker to manage company finance
• Saving at least RM15,000

Long Term ( 5 years)
• Own a company
• Retire from current work
• Saving at least RM30,000
• Get income at least RM3,000 per mont
• Full settlement 1st housing loan

That’s my simple basic guidelines. Nowaday, I’ve wrote my goal at whiteboard and look it everyday. Put in my mind that I can do it and change my life. It is important to list our financial goals to become a guidelines.

When doing this we need to have :-
• Personal balance sheet
• Cash flow statement

| What Is Cash Flow Statement |

These statement will help :-
• Provide information about our current finance position and a summary of our income and expenditure
• Measure our progress in meeting our short-term, medium-term and long-term financial goals.
• Maintain information about our financial activities such as investments and spending patterns
• Provide data you can use when preparing tax forms or applying for a bank loan

Our personal balance sheet reports on what we own and what we owe.
• What we own (assets)
– It include items such as cash savings, real estate, unit trusts or shares in companies
• What we owe (liabilities)
o-It include all types of loans, whether to your bank, family or friends, as well as credit card debt and payments that are due, such as house rental and utility bills

We must know about our net worth. Net worth is our total assets minus our total liabilities. If the total is positive it means you own more than you owe but if not, then it is big problem for you.

To increase our net worth, we can :-
• Increasing our savings
• Reducing spending
• Reducing debt
• Selling some of non-income generating assets/belonging
It is important to set our financial goals as early we can. For those youngster, I’m advice you to start planning and set your financial goals if you want to success. Earlier you start mean more money you can save. It also means you have more experience rather than start in older age.

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