Setting goals is a critical component of success in any endeavor, including personal finances.
No matter what type of goals we set, whether personal goals, career goals, or money goals, we often fail when we’re not specific enough. Tracking unclear goals is difficult, so we might not see any progress, lose motivation, and give up.
Setting SMART goals helps prevent these problems. SMART is an acronym for Specific, Measurable, Achievable, Relevant, and Time-bound (SMART).
Creating SMART financial goals helps you clarify your financial plan and prioritize your spending. If you’ve ever had trouble sticking to a budget, struggled with saving money, or worried about your financial future, setting SMART financial goals can help you on your financial journey.
Why Are Financial Goals Important?
Creating financial goals is an essential step toward financial security. Having short-term and long-term goals changes how you view money. You see how every decision affects your financial health. Setting financial goals also allows measuring your progress and making adjustments when needed.
What Are Some Examples of Financial Goals?
Consider what is important to you as you set your financial goals. You might have several goals, and they may change over time.
Examples of financial goals include:
- Paying off student loans
- Building an emergency fund
- Putting your child through college
- Buying a home
- Saving enough money for your dream wedding
- Setting money aside for a vacation
- Retiring comfortably
All of these goals are worthwhile. Some are short-term goals, while others are long-term goals. These are more like ideas than actionable goals, however.
Your goals should give you direction and motivation. That’s where SMART goals come in.
What Are SMART Goals for Financial Planning?
SMART is an acronym for Specific, Measurable, Attainable, Relevant, and Time-bound. SMART financial goals should have a clear outcome, a deadline, and be realistic based on your income and expenses. Write each SMART financial goal in this format: My goal is to [quantifiable objective] by [date].
Setting SMART Financial Goals
Creating vague goals will not put you on the path toward stability, security, and financial freedom. It is not enough to say your goal is to get rid of credit card debt. Your money goals should be:
- Specific – Be clear and state what you want to accomplish. You don’t want to reduce student loan debt. You want to pay off $50,000 in student loan debt in 5 years.
- Measurable – Is your goal measurable? Create measurable goals by putting a number or a dollar figure to your goal so you can gauge progress.
- Achievable – Review your budget before goal setting and make sure you’re creating a realistic goal. Is your goal achievable based on your finances? Unrealistic goals demotivate you, so make sure you’re setting an attainable goal.
- Relevant – When you create your list of goals, also write down why each one is important to you. Knowing your why and making a relevant goal motivates you to stay on track when times are hard.
- Time-bound – Deadlines and time constraints help you break each goal into manageable chunks, track your progress along the way, and stay motivated. You can create short-term financial goals, mid-term financial goals, or long-term financial goals.
Turning a generic money goal like “get rid of credit card debt” into a SMART goal might look like this:
- I will pay off my $2,000 credit card balance in 5 months by putting $400 per month toward it. I will achieve this goal by not using my card, eliminating restaurant meals from my budget, and earning extra money by driving for DoorDash on weekends.
The SMART goal format makes your goals instantly more actionable and meaningful. The time component also adds a sense of urgency.
SMART Financial Goals Examples
Writing down clear, realistic financial goals and regularly revisiting them will help you take action and achieve them. Here are some SMART financial goals examples you can use as inspiration for creating your own.
Short-Term SMART Financial Goals
The SMART goal setting framework can be applied to any goal, regardless of time frame. Short-term financial goals are those you can accomplish within the next 12 months. Here are some examples of short-term SMART financial goals:
Build an Emergency Fund
Unexpected expenses can ruin your financial plan. Having 3 to 6 months of living expenses saved gives you some cushion.
Hopefully, you have something ($1,000 to $5,000) put aside for emergencies. A good SMART goal will be to create an emergency fund if you don’t.
Suppose you decide to save $3,000 in 6 months. It’s specific, measurable, and time-bound, but is it relevant to you?
If you live paycheck to paycheck, you could be one dentist visit or car problem away from not making rent. Getting rid of that fear is undoubtedly relevant.
What about attainable? A 6-month savings goal means you can divide by six and determine how much you have to save every month. In this case, that works out to $500.
When you look at your monthly budget, you might decide that $500 per month is an aggressive savings goal but reachable if you make some changes. Maybe you decide curbing some bad spending habits and making more money will get you there.
So you give up the gym membership you stopped using, cut your entertainment budget, and pick up extra shifts at work. Doing those things makes your emergency fund goal attainable.
So your final smart goal looks like this:
- In 6 months, I will have a $3,000 emergency fund. I will achieve my goal by canceling my gym membership, reducing my entertainment budget, and taking on extra shifts at work.
And here are some additional SMART financial goal examples to consider for the next 12 months:
Improve Your Financial Literacy
The more you learn about personal finance and increase your financial knowledge, the more you can manage your financial life and build good money habits. You could educate yourself by reading personal finance books or taking a course. You’re not going to become an expert overnight, but gaining more financial knowledge is an achievable goal.
- I will read one top-rated personal finance book per month for 12 months.
Do a No Spend Month
It’s not always easy, but spending less money makes achieving most financial goals easier. Doing a no-spend challenge for thirty days by eliminating all discretionary spending will have you thinking about how you spend money. In addition to the money you save, the lasting effect could be drastically cutting your unnecessary spending.
- This month, I will do a no-spend challenge and cut my nonessential spending down to $0 for the next 30 days.
Increase Your Income
Earning more money can help solve financial problems like carrying too much debt and help you reach your financial goals faster. You can increase your income in several ways, including:
- Getting a raise or promotion at your current job
- Working overtime or extra shifts when available
- Getting a new job and negotiating a higher salary
- Taking on a part-time job
- Starting a business or side hustle in your spare time
Suppose you want a raise, a promotion, or a new job that pays more. Set some career goals for yourself using the SMART goal framework.
- I will earn an extra $2,000 in the next three months by volunteering for two additional shifts per week.
- This Saturday, I will declutter my closet. I will sell the clothes I no longer wear on Poshmark and add the extra income to my vacation fund.
Mid-Term SMART Financial Goals
Medium-term financial goals are the types of goals that take longer than a year but less than 10. It could be a savings goal or something like paying off a large amount of student debt. Applying the SMART goal framework to your mid-term goals makes staying on track for the longer commitment required a little easier.
Save for a Down Payment
If becoming a homeowner is one of your goals, you’ll need a down payment. Here’s how you can make your desire a SMART goal:
- Specific: Make it specific by aiming for 20% of your target purchase price.
- Measurable: Setting a dollar amount and a time frame makes this goal measurable.
- Attainable: Based on your financial situation, you might have to cut expenses, increase your income, or both.
- Relevant: If you have always wanted to own your own home, saving for a down payment is highly relevant.
- Time-bound: How much can you save toward your goal each month? Determine the time component by reviewing your budget, making any necessary adjustments, then calculating how long it will take.
After walking through the framework, your SMART financial goal of raising a down payment for a home you can afford might look like this:
- I will save $30,000 for a down payment on my future home in 4 years. I will reach my goal by having $625 transferred into a separate savings account each month automatically.
Pay Off Your Car Loan
Retiring your car loan makes a good medium-term SMART financial goal. Not having a car payment every month frees up money you can put toward your savings, investments, or other objectives. So your SMART goal could be:
- I will pay off the remaining $10,000 on my car loan in the next 18 months.
Once you pay off your car, you could set another savings goal for your next one.
- I will transfer $200 to my savings account for a new car every month.
When you’re ready for a new car, sell your current one. Combine the proceeds with what you’ve saved, then buy the most reliable vehicle you can afford in cash.
If you can repeat this process with each future car purchase, you won’t ever need an auto loan again. SMART goals will help you get to that point.
Long-Term SMART Financial Goals
Reaching long-term financial goals generally takes ten years or more. With such a long time horizon, automating as much as possible helps. If you incorporate automation into your SMART goals, you can rest assured you’re making progress.
Here are some examples of long-term SMART financial goals you can set:
Save for Retirement
Saving enough to retire is usually the number one long-term financial goal for most people. The earlier you start saving money for retirement, the sooner you reach financial independence. Here is how you can create a SMART long-term goal around participating in your employer’s 401(k) plan:
- Specific: Determine what percentage of your pre-tax income you can contribute and know how much the company matches if any.
- Measurable: 401(k) contributions show on your pay stub, and you can track performance via your retirement plan statements.
- Attainable: Since the money automatically comes out of your check, can you live with a smaller paycheck? Finding a number you’re comfortable with might require lowering your contribution or reducing your expenses.
- Relevant: If you dream of having enough money to stop working and enjoy life on your terms, building your retirement savings is relevant.
- Time-bound: You can use a target age or number of years until retirement for retirement savings goals. For your 401(k) SMART goal, you can break it down by pay period, month, or year.
Your SMART goal might look like this:
- This year, I will contribute 10% of my annual salary to my 401(k) plan and receive the full company match. I will achieve this goal by having the money deducted automatically from my paycheck.
Put Your Child Through College
College tuition is expensive. Starting a career six figures in debt is scary, even when you’re young.
Even if you can’t save enough to put your kids through four years of college, lessening the burden of student loan debt is a noble goal. You can resolve to contribute what you can to a college fund until your children graduate.
- I will automatically transfer $100 from my checking account to our college savings fund every payday.
Pay Off Your Mortgage Early
You might decide to pay your mortgage every two weeks, so you’re making 13 payments a year instead of 12. Automating that through your bank should be easy. You probably won’t even feel the extra payment.
You could also add a bit extra to your monthly payments or put any windfalls such as a tax refund, extra paycheck, or annual bonus toward your principal.
- We will pay $750 toward our mortgage on the 15th and 30th of every month from our checking account using autopay.
Start Making Your SMART Money Goals Today
Planning for your future and setting financial goals puts you on the path to living the life you envision. Whether it’s getting out of debt or saving for the future, setting a goal is the first step to achieving it. By taking the extra step of making financial SMART goals, you better position yourself to make more financially sound decisions consistently and reach your goals.
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The article How to Create SMART Financial Goals (with Examples) was produced and syndicated by Kinda Frugal.
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