Without goals, there is no direction or progress. For any person, setting goals is the first step toward becoming successful. While many people set goals, most of them don’t achieve these goals because they did not set out with “SMART” goals.

There are plenty of people who make the mistake of saying, “My goal is to become debt-free.” Because such a statement lacks detail, this goal rarely becomes reality. “My goal is to pay down $2,000 of credit card debt by Christmas,” exemplifies a clear objective and a better goal. Therefore, setting good goals is as important as the initiative to set them.

What It Means to Be SMART

SMART is a mnemonic you can use to evaluate your objectives and apply to various practices in self-development and productivity. With the SMART method, goals should be:

• S = Specific

Be clear and direct as to what you want to accomplish. A specific goal dismisses the need to spend time judging whether or not you completed your goal — either you did or you didn’t.

M = Measurable

If a goal cannot be measured, you won’t be able to keep track of it or manage it. You should be able to evaluate your progress so that you know whether you are behind schedule, ahead of schedule, or on the right path to complete the goal.

A = Attainable

A goal should lie within your limits. Don’t expect to save $500 every month if your paychecks leave you with $300 spending cash after expenses. An attainable goal keeps you optimistic and motivated.

R = Realistic

It is easy to dream big when setting goals. The bar should be set high enough for you to reach it. If a goal is too far-fetched, you risk losing determination and drive in making it come true.

T = Timely

Set a time frame in which to complete the goal. If you don’t set a time, you’ll tend to put if off until tomorrow. The lack of urgency means you can procrastinate indefinitely and never get started.

Tips for Setting Your Financial Goals

Making financial goals is simpler than setting goals for other aspects of life because money involves numbers, which are used to set concrete and measurable goals.

• Determine how you will approach your goal. Don’t just say that you’ll “put $25 into a savings account every week.” You should know where that $25 will come from and how you’ll transfer it.

• Use specific dollar amounts. Avoid percentages for goal-setting because you won’t see the real underlying numbers. Instead of saying “I’ll reduce 50% of my debt,” calculate the actual amount of debt that you want to reduce.

• Set a date for your deadline. In your mind, you may want to complete a goal within three months but you’ll just keep thinking “three months from today,” which can often end up being never. With a date, you’ll watch the deadline creep up on the calendar.

• Break large goals into smaller, more manageable goals. Because finances can involve big numbers, it is easy to become discouraged. Splitting large goals into smaller and quicker goals can keep you motivated.

Example of a SMART Goal

Let’s say John and Jane are looking to buy a house.

A “dumb” goal by the couple would be: “Save enough for a down payment on a house.”

A SMART goal would be: “By January 1, 2014, we’ll have a $50,000 for a home down payment by a monthly contribution of $1,400 to a savings account.” They calculate their target amount by talking with real estate brokers and mortgage officers regarding homes in their target area. The couple opens a high-yield savings account designated as the “Home Down Payment Fund.” Jane sets up a monthly automatic transfer of $1,000 to this fund and John does the same with $400.

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