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April 2, 2021 · Leave a Comment

How To Create SMART Financial Goals

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Budget· Budget Tips· Debt Free· Debt Free Tips· Frugal Living· Printable· Saving· Ways We Save

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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?

How To 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.

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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?

How To Create SMART Financial Goals

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.

Download your free SMART Goals worksheet today!

How To Create SMART Financial Goals

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makingcentsmatter

makingcentsmatter
Only you can determine what your financial goals a Only you can determine what your financial goals are. If that means you're adding money to your savings account, or contributing to your retirement, while you are paying off debt, then so be it!⁠
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The trick to meal planning is to make it predictab The trick to meal planning is to make it predictable. But predictable doesn't mean the same thing week to week. You could have a chicken meal, a soup meal, a pasta meal, a leftovers meal, a family favorite meal, and so on.⁠
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March Debt Paid numbers are in!⁠ .⁠ House: $51 March Debt Paid numbers are in!⁠
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House: $511.13⁠
Citi: $0 – this has a residual $3 in interest charges since payoff, due in April⁠
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Total Paid in 2021: $8,258.84⁠
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Extra Payment: There isn’t one this month since we were $25 away from zeroing out the budget for our February 15th monthly paycheck. That $25, and monies left from our January 15th paycheck, covered our OOP costs for Hubs’ filling. We also have some savings goals coming up that need to be met, making our debt payments a little lower for the time begin.⁠
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The battle for who can charge what tonight is abou The battle for who can charge what tonight is about to begin. 😬⁠
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A needs his wisdom teeth taken out. I've talked a A needs his wisdom teeth taken out. I've talked a bit in our February Budget Check-In about how much of this I think we'll owe, and you can check that out on my YouTube channel if you're interested, but I wanted to say here...⁠
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To the mother with little kids struggling to get your finances in order, it will get better. I wish I could have heard those words years ago.⁠
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Nearly 10 years ago we were facing a $1,400 out-of-pocket portion for A's Phase 1 orthodontic work (I looked it up after I uploaded the video... we had a $1,400 portion).⁠
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It was a lot of money for us at the time. Our kids were 6, 2, and 3 months old. I don't think we even had $500 in savings, and I just left a part-time teaching job because it wasn't paying the part-time daycare bill, so paying our portion in full was just a dream I didn't think was achievable.⁠
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It's almost payday! Here's how our variable budget It's almost payday! Here's how our variable budgeting categories are working out for the pay month.⁠
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Food is looking good this far into our paycheck, probably because miscellaneous - which includes eating out - took a hit with unexpected purchases. Pet is low for this time of the month, and Household is spot on.⁠
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Fuel looks like it'll be lower than last month (yay for weeks of snow days & delayed school starts), and Therapy had one more appointment than initially planned.⁠
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How's your paycheck budget coming along?⁠
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Automating your finances makes saving money and bu Automating your finances makes saving money and budgeting more convenient, and therefore easier on you. Out of sight, out of mind, right?⁠
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Me? I'm going to set up our sinking fund transfers to automate every payday (the 15th of every month). Our bank set up a feature on their app where we can schedule savings transfers now, and I'm going to take advantage of it!⁠
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Oh my word... our miscellaneous category has gone Oh my word... our miscellaneous category has gone a smidgen overboard this month!⁠
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I foresee a goal for March's paycheck to at out less than twice. That's where this category went awry. $99.16 of it went to eating out. 😑 Some of it was avoidable, but not all of it. Having to drive to multiple appointments in one day during snow squalls and rearranging our whole day was one of those unavoidable instances.⁠
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