Most people start their personal finance journeys because they don’t like the way they’re living and want to do better. But “doing better” is pretty vague. Whether you want pay down your debt or build your nest egg, you’ll need to make some specific, smart financial goals if you want to see improvement.

Fortunately, getting smart is as easy as getting SMART. SMART is an acronym to help you design goals that you can actually meet. Let’s break it down to see what SMART financial goals look like.

What It Means to Be SMART

S Is for Specific

Vague goals like “have a better life” or “get rich” aren’t very useful. What exactly is a better life? What does rich look like to you? The more specific you can be about naming your goal, the more likely you are to meet it. Every great goal starts with a clear vision.

M is for Measurable

You’re much more likely to achieve a goal that you can measure. That idea of a better life is hard to quantify, but if you made a specific goal about spending more time with family or creating more artwork, you could easily track and measure your progress along the way.

A Is for Achievable

It’s particularly important that your financial goals are actually possible, or else you’ll give up entirely. So instead of a pie-in-the-sky goal to be a millionaire in five years, make sure your goal is something you can reasonably accomplish. You can always up the ante later.

R Is for Relevant

Make sure your goals make sense in your life. For example, if you have to move around a lot for your job, saving for a down payment on a house might not be relevant to you.

T Is for Time-Bound

Deadlines give you incentive to work harder on your goal, which increases your odds of success. A vague goal to save up for that house without a timeline for doing so doesn’t give you much reason to skip those lattes.

Examples of SMART Financial Goals

Let’s go back to our example goal of getting rich. How can we turn this vague notion into a SMART goal?

  • Specific: Decide how you’ll earn and or invest this money. What actions do you need to take to make this happen?
  • Measurable: How much money are we talking about here? Always put a dollar amount on your goal.
  • Achievable: Be reasonable about how much you’re willing to sacrifice to reach your goal. Financial wellbeing isn’t about deprivation!
  • Relevant: Getting rich for its own sake isn’t very rewarding. What do you want to use the money for to make your life better?
  • Time-Bound: What are your deadlines? How much money will you set aside each week? Each month? Each year?

Now let’s rewrite that goal:

I plan to invest $100 per month into an interest-bearing money market account so that I can take a vacation to Cancun next year.

This goal is specific about the type of investment account and uses a measurable amount of money over a certain time period. It’s also relevant to living a better life because it’s tied to an enjoyable vacation, and it’s achievable if you adjust your budget accordingly.

You can use the SMART goal formula to craft a plan for building savings, retiring early, or paying down your debt. The details are entirely up to you!

The Bottom Line

Everyone has different financial needs and a different vision of what they want their life to look like. Designing SMART goals helps you take that vision and turn it into a reality by giving yourself a road map to success. So don’t wait for the New Year to get started. Design some SMART financial goals today!

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