How To Create SMART Financial Goals

Goals.

It’s what we all are attempting to achieve throughout our life. Whether you want to be better at drinking water, lose 10 pounds, have a better family life, become debt-free, or just simply more organized while making it through this thing called life… we all have goals. But how can we translate those goals to our finances? How can we create SMART financial goals?

We’re told that our goals should be large enough to “reach for the stars” – that we should have goals that make us want to get up and strive for them each day. Yet, our goals should still be achievable. I don’t know about you, but I fall flat on my face if I don’t have something that’s easily achievable.

But what makes a good financial goal?

In order to have a goal with a clear sense of what direction you are heading, and to make sure your goal still gives you the motivation to follow through, your goal has to have a few components. It has to be a SMART goal.

SMART goals are typically used in business environments, but can easily be translated to life and personal finances. The acronym itself was invented by George Doran in the 1980s – with numerous variants – and stands for Specific, Measurable, Achievable, Realistic, and Timely.

So let’s break down how to create SMART financial goals:

Specific

This indicates that your goal should be well defined. In order to define your goal well, you should ask yourself the following questions:

What is it you want to achieve? Try to keep this to 5 words or less to avoid over-generalizing your goal.

Where will you achieve this goal? If you are going back to college, where will you go? Where will you study? If you want to lose 10lbs, where will you workout?

When will you work on this goal? Will you go to the gym before work, or after dinner? When will you start your first semester back at college?

Why do you want this goal? You have this goal… great! But why is it you want to achieve it? Why do you want to lose weight, or gain financial freedom?
Who will help you achieve this goal? Whether it’s a spouse or coworker, who do you need on board to help you achieve this goal?
Which additional restrictions does your goal have? This question doesn’t always have an answer, but knowing about any additional constraints ahead of time helps you move towards your goal faster. Are there specific workouts you’ll be doing? Specific financial institutions you’ll need to use?

Measurable

In order to know if you have reached your goal, you need to have a way to measure your progress to the goal. Having a measurable aspect simply means you will know when your goal has been ultimately reached.

How much and how many are good ways to think about this aspect. If you have a concrete number, you can easily measure your progress towards that goal.

For financial goals:

How much money will you need to retire?
How much money will you need for a home improvement project?
How many debts do you have to pay off?

Achievable

Your goal needs to be attainable, or else you are setting yourself up for failure. The point of setting goals is to create an improvement from the current state, not to bring yourself down even further.

Setting goals to save $1,000 a day isn’t very achievable while saving $1,000 over the course of a month is.

To determine if this goal is attainable, as yourself:

Is this something that others have done?
Is it possible given your current season of life and scenarios?

To make a goal achievable, it usually just takes some tweaking and fine-tuning.

Realistic

Your goal needs to be real, and relevant to you, not to anyone else. Yes, I just said that your goal needs to be something that others possibly have done, but just because something is attainable isn’t something that is realistic for you.

For example, if you want to save $20,000 over the course of the year, but only make $50,000 and have young children, it may not be realistic given your current stage in life.

When you determine if your goal is realistic or not, you need to factor in all other aspects of your life.

What resources do you have access to?
Do you have help from anyone?
How much time do you have to devote to this goal?
Will it take away from other aspects of your life?

Timely

You should have a clear timeline of when you will reach your goal. Revisit the first step where you made your goal specific, and set a timeline that will help you create realistic steps towards progress.

Is this goal something that will take more than a year or just a few months?

Don’t get discouraged if you don’t reach that timeline; life will inevitably get in the way and your situations will change as you go. Simply fine-tune and adjust your goal to continue onwards, using the timeline to nudge you further along your financial journey.

To break down this step, ask yourself:

What can I do in the next year to help me reach this goal?
What steps can I take in the next 6 months to achieve this goal?
What can I do in the next 3 months to help me reach this goal?
What steps can I take to move me further along in the next month?
What can I do this week to help me achieve this goal?
What can I do today that will help me reach this goal?

By breaking down the steps to your goal, you are creating a timeline for yourself, and also giving your goal small, achievable and actionable steps.

How To Create A SMART FInancial Goal

Creating A SMART goal for saving money:

So setting your goal as “I want to be better with saving money” is not a S.M.A.R.T. goal. It is not specific enough, has no means of measurement, no sense of when you’ll have achieved it, or by when.

Instead, try this:

Specific: “I will increase my savings account balance”
Measurable: “I will increase my savings account balance by $20,000.”
Attainable: This can be done, as many others have done this before.
Realistic: Does this work with your current income? What about your expenses? Can you make this financial goal work?
Timely: “I will increase my savings account balance by $20,000 in the next 24 months.”

Creating A SMART goal for Paying Off Debt:

So setting your goal as “I want to be debt-free” is not a S.M.A.R.T. goal. It is not specific enough, has no means of measuring how much debt you are paying off, and there is no sense of when you’ll have achieved it, or by when.

Instead, try this:

Specific: “My husband and I will pay off all our debt”
Measurable: “My husband and I will bring our debts to a $0 account balance”
Attainable: This is achievable because many others are doing the same.
Realistic: Does this work with your current income? What about your expenses? Can you make this financial goal work?
Timely: Add up your debts, and input them into a debt calculator like undebt.it. “My husband and I will pay down our debts to $0 account balances by November 2025.”

In order to help you define your financial goals so you can achieve them, there is a free printable in our resource library! You’ll start with where you see yourself years down the road and work your way back from there to determine what you can do now to help you achieve that goal. The last page of the printable steps you through the SMART process to better define your goal.