Having trouble sticking to your financial goals? Find out here some tips that can help you out.

You might have got started on your financial resolution for 2021, but find yourself questioning how can you stick to your financial goals.

After all, the easy part is getting started, and the hard part is persisting in achieving your goals.

Find out below 5 tips that you can do and implement to make your life easier and manageable in your financial journey in 2021.

 

Tip #1: Set Simple and Realistic Financial Goals

It sounds simple right? Setting simple and realistic financial goals. But this process is far harder than you thought it will be.

Many times, you list down all the financial goals for the year you want to achieve but end probably achieving only half of them. Either you had too many goals to begin with or they were just too hard to achieve.

First, think of setting simple financial goals that you can understand easily.

“I want to be financially independent” isn’t as simple and straightforward as you think, as it encompasses investing into multiple asset classes and earning enough passive income to cover your expenses.

Instead, think of financial goals for financial independence in terms of “I want to earn at least RM500 per month from my investments in stocks” or “I want to have enough money to start investing for my 2nd property”.

Thinking of your financial goals in more specific and simple goals like these, enables you to be focused on your journey in them.

Second, think of how realistic your financial goals are for 2021. The lessons from 2020 on your financial situation, serve as an important benchmark on how you can determine whether your goals are realistic.

Considering the impact of Covid-19 on the economy in 2020, it is best to consider the amount of pay increments and savings that you can try to achieve. While it might be realistic to aim for a 10% increment in your salary before 2020, aiming for one in 2021 might be stretching it as companies and businesses will probably still be weak due to the pandemic.

You can also use the SMART method to better set your financial goals in more detail.

Tip #2: Have a Straightforward Plan for your Goals

Once you set your own financial goals for the year, you need to have a solid financial plan that is straightforward and not complex. Start by organising your financial goals by priorities. The better you can prioritise from the beginning, the easier the plan will be.

Next, expand on your financial goals with precise and straightforward steps to achieve them. The important point is to set milestones for your goals to determine your progress and decide on what to do.

For example, you want to buy a house in 2021 for your family. You can plan out the steps and milestones for it by the following :

  • Identify the price point of your house that you can afford, and the area that you are interested in
  • Save and allocate a sum of money for your housing down payment
  • Identify a loan officer to help you with the administrative procedures for a mortgage
  • Sign loan documents and Sales and Purchase Agreements to finalise the housing transaction

List out all your steps and milestones for all your financial goals so that you can check your progress and be clear on what you need to do. You can also engage a licensed financial planner to smoothen out your planning.

Tip #3: Set up a System on How to Track the Progress of Your Goals

Once you have figured out what financial goals to aim for and the plan for them, you need an optimal system to track your progress in achieving them.

The tracking system doesn’t need to be sophisticated or expensive but it needs to fulfill the following criterias :

  • The user-interface is intuitive to prevent frustration of users
  • It is simple to view in any electronic devices
  • It is inexpensive

Tracking your progress is important as it allows you to evaluate the time and cost that you have spent in achieving your financial goals, and decide whether your current course of actions are yielding the desired results.

Many times, you don’t achieve your financial goals because you are unsure of where you are in your journey, and you keep doing things that are not beneficial to getting closer to your goals.

You can start off by using Google Sheets which is free to track, and probably the most familiar to everyone as it has similar functionalities with Microsoft Excel. You can access it anytime and anywhere through Google Drive on your laptop or phone.

If you find that Google Sheets is too simplistic, you can try more sophisticated software and applications such as You Need a Budget, Mint and others more. Remember, use a tracking system that suits your need and budget.

Tip #4: Account for Unexpected Changes in your Income and Finances

There are the known unknowns and then, there are unknown unknowns. Basically, we don’t know what we don’t know. When Covid-19 hit in 2020, many of you were caught unaware about the true extent of the impact of the pandemic on economic activities in Malaysia and the world.

Many financial planning and goals were derailed due to it. What can you do to mitigate these risks?

First of, you need to accept that there are some risks that you do not know about that you have to prepare for. When budgeting for your financial goals, you need to be aware that some unknown risk might impact your income and finances.

Proceed by stress testing your finances. If your income drops by 10% and 20%, how hard will you be hit? What kind of spending would you need to sacrifice to keep paying your financial commitments and goals?

Having a mindset of a worse case scenario will serve you well in accounting for any unexpected risks. Worse case scenarios could be in the form of you suddenly losing your job. How deep are your savings that will enable you to keep striving for your financial goals and look for a new job in the meantime?

Tip #5: Build up your Buffer with Safe, Liquid Investments

Once you account for unexpected changes to your income and finances, you will need to build up a solid base to buffer you and your family against them.

The best way to do this is to allocate more of your income and savings into safer and more liquid investments such as

  • Government Bonds
  • Fixed Deposits
  • Exchange Traded Funds

Remember, the priority here is to have assets that are safe and easily convertible to cash in case you need them to weather an unexpected situation. In light of saving up enough for your financial goals, it is not advisable to take on higher risk investments as they typically take a longer time to garner the returns you are looking for and they could possibly go bad.

You can still fulfill your financial goals in a bad situation, if you have sufficient buffers. Engage a licensed financial or investment planner to properly plan your investments.

Conclusion

The financial lessons in 2020 have taught you that you need to change and adapt some of your financial goals in 2021, to take into account changing economic conditions. To properly facilitate this process of sticking to your financial goals, you can use the tips above in chronological order to get a better grip on how you can achieve your financial goals.

 

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