We all harbor financial ambitions we’d like to reach. Save more cash. Eliminate debt. Boost our credit ratings.
And yet we’ve all watched well-meaning intentions fizzle out before they ever materialize.
The secret to creating goals you’ll actually follow through on is to make them SMART:
- Specific
- Measurable
- Attainable
- Relevant
- Timely
Planning SMART financial targets will guide you toward where you want to be with your money.
Framing Money Goals as SMART Targets
Let’s examine each element of crafting SMART goals.
1. Make Your Goals Specific
The clearer and more precise you can be about your financial aims, the better.
Use exact figures. Explain precisely how you intend to pursue your monetary objective.
For instance, merely saying you want to grow your emergency savings is too vague. A more exact target would be: I want to boost my emergency fund by $600 over the next six months by automatically transferring $50 from each biweekly paycheck into my savings account.
Being specific supplies a concrete plan to follow. You’ll know exactly what you’re aiming for and how to get there.
2. Make Your Goals Measurable
You’ll want to monitor your advancement while working toward your financial aims. That’s why having a measurable component is crucial.
It might be a dollar figure. Maybe you plan to pay an extra $100 above the required minimum on your car loan every month.
Or you could use a percentage, such as directing 15% of your take-home pay into a Roth IRA.
You may choose to measure progress by actions. If you want to increase your earnings, you might commit to submitting five job applications each week to roles in higher-paying fields.
Whatever structure you choose, ensure there’s a way to quantify progress so you can tell whether you’re moving forward.
3. Make Your Goals Attainable
Putting forth an unrealistic target is a fast track to disappointment. While aiming high sometimes pays off, you’ll increase your odds of success if your goals are actually reachable.
If you earn just above minimum wage and live from paycheck to paycheck, expecting to stash away $20,000 in a single year is likely unrealistic. Consider your present situation when formulating your monetary goals.
Ask yourself: Is this realistic for me? What obstacles will I need to overcome? Will I exhaust myself trying to do something nearly impossible?
Goals should be challenging but also feasible.
4. Make Your Goals Relevant
Understanding the “why” behind your goals is crucial.
It’s not sufficient to merely say you want to raise your credit score. Saying you want to increase your credit score by 80 points so you can qualify for a mortgage to buy a home in your ideal neighborhood is a far more compelling target.
Your financial goals should be connected to the outcomes you want in life. Make them meaningful and pertinent by reflecting on why you want to see them achieved.
5. Make Your Goals Timely
Deadlines can be frustrating, but they’re essential for accomplishing goals.
Assign yourself a date by which you intend to complete the goal. That deadline makes the objective timely because it creates urgency.
Be specific and realistic about your timeframe. Extra credit if you break the main goal into segments and assign each a timeline.
For example, if you hope to buy a house within 12 months, you might spend the first five months reducing debt to get your debt-to-income ratio below 25%. Spend the next five months building up your savings for a down payment and closing costs. Use the final two months to tour homes within your price range.
Structure your goals around steps you can start on right away so you can begin making progress sooner rather than later.
Alex Martin is a senior writer at Savinly.
