Short Term And Long Term Gaols For Mba In Finance Effective Financial Goal: The Five Characteristics

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Effective Financial Goal: The Five Characteristics

In financial management studies, an effective financial goal should have 5 characteristics that can be easily remembered as SMART. The following paragraphs explain all 5 features:

1) Specific

We may be thinking of becoming financially independent but do you know what it takes? This goal seems very common. Our goals need to be specific so that we can focus specifically on each area of ​​financial planning and easily manage our own expectations. A specific goal usually has only one outcome.

For example, aim to invest RM200 per month in a unit trust and accumulate at least RM2400 a year; Or spend within our budget every month. These specific goals are going to have different results but when combined, they will ensure our cash flow is healthy. When each specific goal is met, we get closer to financial freedom.

2) Measurable

We may be working very hard, but how do we know if our goals have been achieved? Therefore, our financial goals must be quantifiable.

For example, we want to invest and deposit RM 50,000 in 2 years and the progress can be easily measured by looking at our investment account statement.

In fact, we should be able to measure or review our current net worth, debt-to-income ratio and review progress towards achieving goals such as calculating return on investment (ROI) and our current insurance policy. It would be great if we could keep a journal and review our current plan.

3) Achievable

Many people are influenced by the ‘law of attraction’ and believe that ‘nothing is impossible’. Because of this, we tend to set difficult goals that require great effort. However, are these goals realistic and achievable? It is important to know whether the goal is within our ability and logical standard.

For example, if your goal is to achieve RM1 million in a year by investing RM1000 per month in any scheme. How likely is it to achieve this? In fact, such an investment plan requires a very high ROI in the short term and often comes with very high risk. You can easily lose your capital.

Most importantly, we should not stretch ourselves to achieve unrealistic goals. This is to avoid disappointment in failure which can end in great disappointment.

4) Rewarding

We want to achieve goals because we want to get something in return otherwise no one will work hard. While working towards achieving a goal, we must be sure of the results to be achieved and this is important for our lives. In fact, it should be meaningful and fun.

For example, a person wants to invest his money to accumulate an education fund for his son in 20 years. In the future, this goal will be rewarding as her son will be able to enroll in higher education.

However, rewards can be in any form such as physical, financial, relational and spiritual.

5) Time-limit

We need enough time to achieve our goals. It can be short-term, medium-term or long-term, depending on the type of goals to be achieved. Punctuality has become an important aspect in life. Therefore, we have to set a deadline to avoid delays. It would be better to set a schedule to do everything.

For example, saving for retirement will take many years because it is a long-term plan and involves a large sum of money. Therefore, planning for retirement in the short term (1 to 5 years) may be unrealistic unless one is willing to make a major commitment to it.

In short, time is precious because it gives opportunities for growth and creates great results. So, the wise man always said, ‘Start early and stop delaying’.

summary

An effective financial goal always has these smart features; Specific, measurable, achievable, rewarding and time-bound. This is to ensure that our goals are meaningful and move us closer to financial freedom. Good luck with your goal setting.

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