If you’ve struggled to set and achieve financial goals in the past, you may want to try setting “SMART goals” this time around.
SMART Goals: Use This Savvy Strategy to Help Meet Your Money Aspirations This Year
When it comes to achieving your financial goals, it can be helpful to reflect once or twice a year on where you are and where you’d like to see yourself in the future. The goal-setting process can feel like an uphill battle at times, especially when it comes to bigger or longer-term goals, but it’s an important ingredient in your financial success. If you’ve struggled to set and achieve financial goals in the past, you may want to try setting “SMART goals” this time around.
What Does it Mean to Set SMART Goals?
“SMART” is an acronym that stands for Specific, Measurable, Actionable, Realistic, and Timely. Coined by George T. Doran in 1981, this formula is said to be ideal for goal-setting because it helps you visualize and plan for your end result and determine the steps you need to take, all within a framework that helps you stay on track, as well.
Below we’ll walk you through each element of setting SMART goals and share tips on how you can use the process to help you set and achieve your own financial goals.
Get as SPECIFIC as Possible
Adding specificity to your financial goals makes the planning process easier. You’re also more likely to follow through. Begin by thinking about a goal you have and simply describing it to yourself. For example, say your goal is to ‘buy a new home’ – describe what that looks like to you. What kind of home? How do you want to pay for it? How old do you want to be when you buy it? In answering those questions, you’ll be able to move your general goal into something more specific, such as ‘buy a $300,000 home with a $50,000 down payment before I turn 40.’ Adding more details to your goal gives you a blueprint you can follow as you begin working toward achieving it.
Make Sure Your Financial Goals are MEASURABLE
After getting specific with your goal, the next step is to make sure that you can measure your progress. You’ll want to think about methods you can use to determine whether you’re progressing forward and staying on track.
If we revisit the home purchasing goal, how would you measure your progress? An easy way would be to keep track of your savings to ensure you’re getting closer and closer to that $50,000 down payment. Can you take it further than that, though? What about tracking your spending to be sure that it remains under a certain threshold each month so you can contribute more to your savings? The key is to choose measurements that provide you the opportunity to celebrate small successes and boost your motivation as you work toward your goal. If tracking expenses is part of how you’re measuring your goal,
Choose Goals that are ACHIEVABLE
While shooting for the stars is admirable, your chances for success are better if you’re setting SMART goals that are achievable basedon your current situation and the resources available to you. It can be a discouraging to dial down or change your goals, but you may feel better achieving something meaningful in the long run, rather than setting yourself up for failure from the beginning.
Going back to the home purchasing goal, if you’re 35 now and without much in savings, then saving $50,000 for a down payment by the time you’re 40 may not be a truly achievable goal for you. If you’re realizing that one or more of your financial goals needs adjusted, try these steps:
- Set your sights lower (for now). Perhaps you need to spend less on a home or set SMART goals to save a smaller down payment.
- Change the timeline. You could keep the $50,000 down payment goal for a $300,000 dream home but give yourself until you’re 45 to accomplish the goal.
- Break down your goal into smaller, interim SMART goals. Instead of working toward the big-picture goal of purchasing a home, you could focus instead on paying off all your debt so that you can eventually save more money at a faster pace.
It’s important to note that setting achievable goals is not the same as setting easy goals. Your SMART goals should be challenging, but they need to be something that you’re capable of reaching. Otherwise, you may be setting yourself up for disappointment. On the other hand, achievable financial goals provide you with motivation and encouragement.
Be REALISTIC with Your Goals
This may sound like making your goals achievable, but it’s not quite the same. Setting a goal that’s achievable means asking yourself whether you can accomplish it now or in the future, even if you need to make changes to the overall goal. Being realistic with your SMART goals means determining whether your goal makes sense for your life circumstances now and in the future.
When it comes to financial goals, being realistic looks a lot like living within your means. So, you want to leave a margin of error, knowing that life is unpredictable. We can never be sure what the future may throw at us, including financial setbacks. This is especially the case for long-term financial goals.
Give Yourself a Set Amount of TIME
All the SMART goals you set should have a detailed timeline. Giving yourself deadlines means you’ll be more likely to take consistent action rather than letting time slip away – which can easily happen if there’s no timeframe in place for achievement. Having a timeline can also help you with goal measurability, especially if you set periodic check-ins for yourself to assess your progress.
Revisiting our home buying example, the timeframe of the goal is to purchase a home by 40 with a $50,000 down payment. You could take that even further by setting deadlines for smaller savings intervals to ensure you’re staying on track. In this way, time is one of the best indicators of whether you’re making progress.
Set Yourself Up for Success with SMART Goals
Using the SMART goals framework to set your financial goals can take some getting used to. However, if you stay committed to the process, you may be surprised with the results you can achieve.
At Aviance, our team is committed to helping our clients meet their financial goals and achieve lasting financial freedom. If you think that you may benefit from professional guidance with your financial planning, please consider scheduling a call with us to discuss your unique financial situation.
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