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How to make SMART financial goals

November 6, 2020

By this point in your life, you’ve probably created some financial goals. But, they’re always worth reassessing, especially to test whether or not they are SMART. That is to say that they are specific, measurable, attainable, relevant, and time-based. 

No matter where you are in your financial journey, making sure you’ve created goals that appropriately line up with your age, retirement goals, and time horizon, is extremely important. 

It’s all too easy to set vague goals when it comes to money and finances. Of course writing down “I want to be a millionaire!” at the top of your monthly calendar is great, but it could be much more achievable if you set actionable steps in order to get there.

For the sake of this exercise let’s use the example above of “I want to be a millionaire!” and transform it into a SMART goal. You can apply this methodology to each and every financial goal you set this year. 

S: Specific

To make this goal specific, tack a specific amount onto the goal. Reaching a millionaire milestone could mean anything if it’s unspecified. Do your research to find out exactly why this is your goal. A simple web search will reveal how much you’ll need to retire in Arizona (a comfortable retirement is $1.1 million). 

In this case, you can edit the goal to reflect this new information. 

Example: “I want to be a millionaire.”

Specific: “I want to save at least $20,000 this year to help me reach my goal of retiring in Arizona.”

M: Measurable

Now that we know the specifics of our goal, let’s get into how we’re going to measure this goal. Think about how you measure anything. Dates and numbers are important. If we leave out measurements, we could miss out on the fulfilling feeling of checking this goal off our list! 

Example: “I want to save at least $1.1 million so I can retire in Arizona.”

Measurable: “I want to save at least $20,000 by December 31st of next year to help me reach my goal of retiring in Arizona.”

A: Attainable

Before we write this goal down in our journal, let’s do a quick reality check. Is this goal actually attainable? Is it within my means to save an extra $20,000 this year? Can you freelance or pick up a side gig to boost your earning potential? Only set goals that you can achieve, because if you set them too far out of your realm of attainment, you may set yourself up for failure.

Example: “I want to save an extra $20,000 so I can retire comfortably in Arizona.”

Attainable: “I want to save an extra $20,000 by picking up an extra side gig for 6 months so I can reach my goal of retiring comfortably in Arizona.”

R: Relevant

Take a look at your SMART goals and make sure these are in alignment with how you want to live your life. If you set a SMART goal to save up enough money to buy a Range Rover, purely because you think it will impress your friends and family, that is not a relevant SMART goal. Remember, this is your life, and you have the tools to make your financial dreams a reality. 

If you set too many goals that are not focused or based on gaining other people’s approval, you will find that it’s much harder to reach them. 

Example: “I want to save an extra $20,000 so I can retire comfortably in Arizona.”

Relevant: “I want to save an extra $20,000 so I can retire comfortably because it’s my dream and I know exactly the type of house I want!”  

T: Time-based

Putting time stamps on your goals can help you monitor how you’re moving towards them. Break your goal up into small chunks to measure yearly milestones.

Making mini milestones can help make the big goal reachable.

Example: “I want to save an extra $20,000 so I can retire comfortably in my dream home in Arizona, with a view of the desert out of my window.”

Timely mini goals: 

2 month goal: “I will apply to freelance jobs and find a side gig that pays an extra $1,000 per month. I will maximize my 401K. ”

6 month goal: “I will set aside an extra $6,000 for my goal to retire in Arizona.”

1 year goal: “I will save an extra $20,000 by June 31st!” 

In addition to setting SMART goals, here are some actionable tips to take along the way to ensure you reach your ultimate goal:

For a SMART goal bonus, swap out any goals for which you wrote “I want” and replace them with “I will..” This helps train the mind to understand that these are goals you are committing to and will follow through on. Be sure to review your SMART goals on a regular basis to evaluate how you’re doing. Goal setting should be fun! So make it a point to celebrate your milestone successes along the way.

If you’re ready to set this year’s SMART goals, download our FREE 4-week personal finance challenge here. You’ll map out your personal wealth creating strategy to help you meet your goals and give back to the people and communities that helped you on your financial journey.

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