Building wealth takes time and effort. It’s not enough to make a plan. By setting S.M.A.R.T. financial goals, you are on your way to successful money management and a healthier financial future. In this article, we discuss setting achievable financial goals using the S.M.A.R.T. Goal technique.
Highlights:
- The Secret to Your Financial Success
- Easy Ways to Define S.M.A.R.T. Goals
- This Technique Could Save You $1000s
- Use This Tool to Get Smart With Your Cash Today!
- Do You Have the Game Skillz to Level Up?
The Secret to Your Financial Success
The secret to your financial success is simple: set goals. Goals are a part of everyday life and provide a sense of focus, direction, accountability, and motivation. It’s exhilarating when we set goals and accomplish them! But as we hit bumps in the road, we sometimes give up too quickly and feel discouraged.
How many times have you made a New Year’s resolution with the full intent of accomplishing it, only to give up a few weeks later? Did you give up because it wasn’t realistic or was your plan flawed? Have you made the same resolution year after year to no avail? The sense of failure may have led you to stop making resolutions altogether. But, if you had known how to implement S.M.A.R.T. Goals and set a specific and achievable goal, your success may have inspired you to improve your financial wellness by setting more realistic goals each year.
Setting S.M.A.R.T. Goals is a proven technique that provides a formula for success. By implementing the S.M.A.R.T. goals technique, you are giving yourself a specific and measurable financial target to hit within a specified time.
“Setting goals is the first step to turning the invisible into the visible”-Tony Robbins
Research has proven that individuals who set financial goals decrease financial stress and have a healthier relationship with money. According to businesswire, 83% of Americans who set specific financial goals feel better about their finances. Better yet, of those who did not achieve their goals, 64% reported they felt better about their finances than those who did not set financial goals. Setting specific and measurable financial goals will help you focus on what you want to accomplish and provide you with the tools to improve your overall financial wellness.
Think about a financial goal that could easily be accomplished in a short amount of time. What is it you really want and how much of it? You might consider creating a budget, starting an emergency fund, paying off a debt, or building a savings account; how much should be a tangible and solid number.
Consider its relevance to bigger goals. Will it help you reduce financial stress? Free up more cash in your account? Decrease debt?
Whether you’re planning short-term or long-term financial wins, you’ll raise your chances of success by implementing the SMART goals approach.
Easy Ways to Define S.M.A.R.T. Goals
Focus on what you can control and start small by setting SMART financial goals that are easily achievable and time bound. SMART is an acronym that stands for:
Specific - 🔍 clearly stated so that anyone can understand it. Your financial goal needs to be specific, not vague or generic. Be clear on your financial goal and how it will improve your financial health. Know exactly what you want to achieve. Ask yourself-What needs to be accomplished and who will accomplish it?
Measurable - 📏 how the action will be measured. Make your financial goal measurable by quantifying it with a clear number. By allocating a specific number to your goal, you will be able to measure your progress and track achievement. Ask yourself-How much?
Achievable - 🎯 realistic given the realities you face. One of the biggest obstacles in goal setting is setting expectations too high. Your financial goal should be achievable and set you up for success. You can always set another SMART goal! Ask yourself-Is your financial goal something you can reasonably accomplish?
Relevant - 🔗 fits your purpose. Your financial goal should be relevant to your overall goals and align with your financial vision. Ask yourself-Why are you setting this goal?
Timely - ⏰ specific timeline for completion. Give yourself a timeframe to achieve your financial goal. Think short term. This will help you avoid procrastination and keep yourself accountable. Ask yourself: When do you want to achieve this goal?
By defining these parameters, you will ensure your goals are achievable, eliminate guesswork, easily identify milestones, and track goal progress.
This Technique Could Save You $1000s
Once you define the S.M.A.R.T. goal technique you can combine the steps to formulate an overall financial goal. Your S.M.A.R.T. financial goal should be formatted similar to the following:
I will (Specific)(Measurable) in (Timebound) by (Achievable). I will do this by (steps for Achieving), (Relevance).
Example 1: Paying off a loan
Paying off a loan is one way to decrease your debt and improve your financial health. You can use the S.M.A.R.T. formula to plan a specific financial goal and achieve loan payoff.
For this example, let’s assume you have taken out an interest free loan for $100.00.
Specific: What needs to be accomplished and who will accomplish it?
🔍 Your specific goal is you will pay off your loan balance.
Measurable-How much?
📏 Your measurable goal is the amount of $100.00.
Achievable - Is your financial goal something you can reasonably accomplish? To achieve this goal, you will need to define actionable steps. You may need to cut down on extra expenses by using coupons and decreasing your weekly spending by $12.50.
🎯 Your achievable goal is you will pay $25.00 towards your loan payment every two weeks.
Relevant-Why are you setting this goal? Are you working towards paying off your debts? What relevance does this goal have towards your financial health?
🔗 Your relevance is that you are paying off your loan to decrease your debt and improve your financial health.
Timebound-When do you want to achieve this goal? Paying $25.00 biweekly will allow you to pay off a $100 loan in 8 weeks.
⏰ Your time bound period is 8 weeks.
Your S.M.A.R.T. financial goal is:
I will pay off my $100 loan in 8 weeks by paying $25.00 every two weeks towards the balance. I will achieve this by using coupons to save money and reducing my weekly expenses by $12.50, which will decrease my debt and improve my financial health.
Example 2: Building an Emergency Fund
Building an emergency fund will ensure you are able to cover unexpected expenses and job fluctuations. Financial experts suggest having at least six months of income set aside in an emergency fund. This may seem unachievable, but by setting S.M.A.R.T. goals, you will have taken the steps to achieve financial stability.
For this example, let’s assume your monthly income is $2000.00 after taxes. You will need to build an emergency fund equal to $12,000.
Specific: What needs to be accomplished and who will accomplish it?
🔍 Your specific goal is to build an emergency fund.
Measurable-How much?
📏 Your measurable goal is the amount of $12,000.
Achievable - Is your financial goal something you can reasonably accomplish? To achieve this goal, you will need to define actionable steps. To achieve this goal, you may need to create a budget and use a budgeting tool to implement it.
🎯 Your achievable goal is you will deposit $115.38 into your emergency fund each week.
Relevant - Why are you setting this goal? Are you building an emergency fund to cover unexpected expenses or job shifts? What relevance does this goal have towards your financial stability?
🔗 Your relevance is you building an emergency fund to prepare for unexpected expenses and secure financial stability.
⏰ Timebound-When do you want to achieve this goal? Depositing $115.38 a week into your emergency fund will allow you to achieve your goal in two years.
👉 Your time bound period is 2 years.
Your S.M.A.R.T. financial goal is:
I will build an emergency fund of $12,000 in two years by depositing $115.38 into the fund each week. I will achieve this by creating and maintaining a budget, which will prepare me for unexpected expenses and job shifts and improve my financial health.
Example 3: Improving your credit score
Improving your credit score takes time and diligence. Before you begin, you will need to know your exact credit score and have a thorough understanding of your credit report. If you have derogatory marks or collections, you will need to make a plan to pay off the collections and make all debt payments on time. You can use the S.M.A.R.T. formula to raise your credit score by improving your income-debt ratio, decreasing credit card usage, and paying off your credit card balance.
For this example, let’s assume you have a credit card account with an outstanding balance of $500.00. Several factors go into improving your credit score, but let’s predict you will raise your score 25 points by eliminating usage and debt.
Specific: What needs to be accomplished and who will accomplish it?
🔍 Your specific goal is you will pay off your credit card.
Measurable - How much?
📏 Your measurable goal is the amount of $500.00.
Achievable-Is your financial goal something you can reasonably accomplish? To achieve this goal, you will need to define actionable steps. You will need to stop using your credit card and put $100.00 a month plus interest towards the balance. It’s also important to mention that payments must be made on-time.
🎯 Your achievable goal is you will pay $100.00 towards your credit card debt every month, on time.
Relevant - Why are you setting this goal? Are you working towards improving your credit score? What relevance does this goal have towards your financial wellness?
🔗 Your relevance is you are paying off your credit card to improve your debt-income ratio and credit score.
Timebound - When do you want to achieve this goal? Paying $100.00 a month plus interest will allow you to pay off a $500 credit card balance in 5 months.
⏰ Your time bound period is 5 months.
Your S.M.A.R.T. financial goal is:
I will pay off my $500 credit card balance in 5 months by paying $100.00 plus interest every month towards the balance. I will achieve this by not using my credit card and making timely payments, which will improve my credit score and financial health.
There’s never a better time than now to implement the S.M.A.R.T. goals framework. Improving your financial health is achievable; one S.M.A.R.T. goal at a time.
Use This Tool to Get Smart With Your Cash Today!
We created an easy-breezy S.M.A.R.T. Goals Template to help you plan and track your financial goals. Simply download the template and make a copy to begin working on your financial goals! S.M.A.R.T. Goals Template
Do you have the game skillz to level up?
Who doesn’t love playing games? We’ve created a fun and engaging quiz game just for you! Compete with your family and friends, challenge your kids and have fun testing your S.M.A.R.T. goals knowledge. Click here to access the game on Kahoot!
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