How To Set SMART Financial Goals The Right Way

In this post I’m going to show you how to set SMART financial goals and implement them the right way to win at money this year!

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Like most people, I’ve thought about what my goals would be at the start of a new year.

Unfortunately, for many years I failed to accomplish any of what I had set out to do. Especially when it came to achieving my financial goals.

It wasn’t until I began using SMART financial goals that I started making real progress in my personal finances. However, success doesn’t come just from the goals themselves. It also has a lot to do with how you implement them.

In this post, I’m going to show you how to set SMART financial goals the right way, and how to implement them, to achieve financial success.

Let’s get started.

How to Set Financial Goals

There’s a saying that goes, “A plan without a goal is just a dream”.

That’s because having a goal provides you with a destination and allows you to design a roadmap that will ensure you arrive at that target.

Without a goal, you will just try things aimlessly and without a clear purpose.

That saying applies to basically everything in life, but it’s especially true when it comes to various types of financial goals. While many people may understand this, knowing how to set financial goals can prove difficult to some.

What Are Some Examples of Financial Goals?

Many people believe that financial goals always have to do with money. While many do, that’s not necessarily true. Financial goals can range anywhere from wanting to start a business to saving up for a car.

Some examples of good financial goals include:

• Creating a budget
• Paying off debt
• Getting life insurance
• Saving up for retirement
• Non spending money for a period of time
• Creating an emergency fund
• Buying a home
• Saving for a downpayment on a car
• Paying for a child’s college fund

There are two things to consider when coming up with personal financial goals.

The first one is the timeframe. The second one is how specific the goals are.

As far as timeframe is concerned, you should have several financial goals that span both the short-term, mid-term range, and the long-term.

Short-term financial goals may include things like saving up for Christmas presents or buying a car in 12 months.

Long-term financial goals would include things like retirement and estate planning, and considerations for life insurance, for example.

When it comes to how specific the goal is, we’re talking about SMART goals.

What is a SMART Goal?

The concept of SMART goals has been used since the 80’s. They were first introduced as a management tool, but have since expanded to many other areas.

One of the main reasons why New Year’s resolutions fail is because they are unattainable or unrealistic. You get unmotivated and give up on the goal altogether.

SMART goals ensure that doesn’t happen by keeping your goals clear and actionable.

The acronym stands for:

S – Specific: This will address what, who, which and where of your goal. You should determine what will be accomplished, who is involved, what resources are needed, etc.

M – Measurable: This will prompt you to answer how will you know that you’ve accomplished your goal. It will answer how much or how many.

A – Achievable: This will answer the how and will address any constraints or factors hindering your goal.

R – Relevant: This will address how well your goal aligns with everything else in your life.

T – Time-Limited: The last letter answers the when.

What is a Good SMART Goal?

SMART goals now span a wide range of fields, and are widely used in academics and many industries. They are also often used in the area of personal development.

Good goals to have in the area of personal and professional development include:

• Attend at least two networking events per month and exchange information with at least three individuals.
• Read one book per quarter this year.
• Go for a 30 minute walk at least three times a week.
• Join three professional groups on Facebook and engage with it at least once a week.
• Join a public speaking club and participate at least once monthly.
• Volunteer four hours a month with a local charity.
• Disconnect from social media for at least 30 minutes three times a week.

The reason why SMART goals have been widely used with great success is that they can keep you accountable and on track.

SMART Financial Goals

Now that we’ve talked about smart goals in general, let’s apply that concept to personal finance.

Say you want to become debt free. It sounds like a great goal to have, but just stating that you want to pay off your debt doesn’t give you a concrete plan of action.

Now let’s turn that goal into a SMART goal.

To do that, you will need to address the following questions:

• Which debts do you need to pay?
• Who will be involved? Will it be just you or do you need to involve a partner or family member?
• How much do you owe?
• What is a realistic amount you can set aside each month to put towards your goal?
• Is this the right time to attempt paying off your debt?
• How long will it take you?

After answering these questions, you will have a much clearer idea of what you’re trying to accomplish, and perhaps your goal now looks like this:

To pay off $30,543 in 36 months.

This goal will definitely allow you to determine what you need to do each month in order to reach your goal, which in this case would be to save $849 each month for the next 36 months until you become debt free!

What is a SMART Goal in Personal Finance?

Like the example above, a SMART goal in personal finance can be related to paying off debt. It could be limited to paying off only credit card debt, or student loan debt, or it can encompass all types of debt you’re currently carrying.

Here are other examples of what a SMART goal in personal finance could look like:

Short Term Financial Goals Examples

• I will save $1,000 every month between January and June for the family’s summer vacation
• My fiancé and I will each set aside $100 a week for a year until we have completed our wedding fund of $10,400
• I will not spend any money for the month of February, other than groceries and gas
• My spouse and I will meet with three financial planners in the next month and decide on an investment strategy

Long Term Financial Goals Examples

• I will max out my 401(k) contributions every year for the next 10 years
• My spouse and I will research and decide on one rental home to purchase every five years.
• I will open a college fund for Junior and set aside $3,000 each year for it
• We will make an extra $10,000 yearly towards our mortgage for the next 5 years.

The Right Way to Implement SMART Financial Goals

Now that we know how to set great SMART financial goals, we need to talk about implementation.

Having a goal set is simply not enough to get you across the finish line. I learned this the hard way!

It took me almost five years to become debt free due to bad implementation of my goal.

Here’s several techniques that will ensure your goal doesn’t fall by the wayside.

Track Your Goal

Life gets busy. Between work, kids, chores, and everything else, it’s easy to lose track of your goal.

When this happens, it’s quite simple to get derailed and just give up on your goal altogether.

One of the easiest ways to keep track of your financial goals is by using a financial goals worksheet, planner or goal tracker.

I personally like the SMART Money Goals Planner by El and Al Co. It’s simple to use and does a great job keeping you on track.

To get your copy, check out the planner here:

Also, if you do happen to get derailed a month or two, simply adjust your goal or plan to account for that.

It may seem demoralizing, but it happens to all of us.

Don’t give up!

Break Down Your Financial Goals Into Small Chunks

When looking at a financial goal, it’s often better to set smaller milestones along the way.

Say your goal is to save $1,000 a month but you’ve only saved $50 each month since forever.

You’ll have a better chance at reaching your overall goal if you keep it simple.

First plan on saving $100 a month for a few months and then moving on to a larger target.

For your goals to be successful they needs to be realistic.

Know what works for you and your family, and make your goals attainable. Celebrating those small milestones also goes a long way to keep you going.

Make Your SMART Financial Goals Actionable

When it comes to your finances, your goals should be actionable. They should provide you with a road map as to how you’ll accomplish them. Otherwise, they’re just nice words on a piece of paper.

To make your goals actionable, document what your starting point is. Then, set up a plan to progressively achieve your goal throughout the year.

Make Your Goals Fun

Lastly, another reason why New Years’ resolutions are often abandoned before January is over is because they feel like work.

Your goals will have a higher chance of being successful if you think about them as something you get to do, instead of something you have to do.

Some easy ways to pump some fun into your goal setting process is to turn it into a competition, involve the kids, or add in a small reward for each milestone you complete.

Keep this in mind when you set your financial goals for any given period, and if you’re creating a budget, be sure to not make it so restrictive that you’ll come to hate it!

Financial SMART Goals in Action

Now that you know how to implement your SMART financial goals the right way, let’s take a look at how this may play out in real, every day life!

Saving Money

If your goal is to save money, start by documenting your starting savings account balance. Then, find out how much money you’ll need to achieve your goal for the year.

If your goal is to have 3 months of expenses saved up by year end, then find out how much that represents and divide it over 12 months. If you want to have an extra $1,200 by December, you’ll need to save about $100/month to stay on track.

Once you know how much you’ll need each month, start looking at the two components that will determine how much money will be available for savings each month: Income and expenses.

If you’d like to receive a free Quick Start Guide to Successful Budgeting to help you get started, sign up here.

On the income side of the equation, you’ll want to get creative on how to bring in extra money. This will look different for each person depending on their line of work and their time availability.

This could mean anything! From picking up extra shifts or some overtime hours at the office, to babysitting, holding a yard sale or driving for Uber or Lyft on the weekends.

On the expense side, your objective should be to minimize your expenses as needed to achieve your monthly goal. I recommend:

• Making a list of what will be considered a need and what will be considered a want. Anything that’s not a need will be postponed until after your goal is reached.
• Tracking your expenses so you can have a better idea of where you can make some adjustments.
• Paying with cash for as many purchases as possible. This forces you to be more conscious of where your money is going. Use a cash envelope system to keep your money organized, or a spending tracker app (for iPhone or Android) to track your money from your mobile device.
• Involving your partner, your children, and any other person that will affect how your money is spent. Make it a family experience and make sure everybody is on board.

Paying Off Debt

If your goal is to pay off debt, document all your debts and how much you owe on each. Then, develop a plan for how you’ll pay them off over the next months.

If there’s some small bills that you can reasonably pay within the first month or two, I recommend starting there, and then moving on to larger ones, considering both the overall account balance and interest rate.

However, don’t let indecision paralyze you. If you can’t decide which bill to tackle first, just start somewhere, and keep the momentum going.

To keep track of your debt payoff plan and progress, I recommend the Debt Pay Off App, which analyzes your debt and suggests which debts to pay off first, depending on your overall debt payoff goal.

It’s a great resource to keep you motivated and on track to achieve your financial goals!

Increasing Your Credit Score

If your goal is to increase your credit score, document what your credit score is now. If you get your free credit report by going to myFICO, you will see action items that will improve your credit score.

Although it may take some time, if you act on the suggested items for your specific situation, you may improve your score significantly in time for year end.

For more information on how your credit score is calculated and how to improve each metric, grab my free Quick Start Guide here!

Final Thoughts

No matter what your financial goals are this year, be sure to make them SMART and actionable. Pencil in some fun, keep track of your progress, and leave some wiggle room for errors.

After all, no goal or plan is perfect.

Even in the business world, deadlines are missed, and numbers are miscalculated.

So even if you miss your goal or milestone one month, don’t give up! Celebrate the small accomplishments and keep moving forward.

If you persevere, even if you don’t get it perfectly right the first time around, you will eventually achieve your financial goals.

How do you plan to reach your financial goals this year? Be sure to comment below!