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Set up SMART goals for personal finance

Published Date
Author Beth Craft

Master this strategy to get where you want to go.

If you’ve familiarized yourself with the priority pyramid and have identified where you are on your financial journey, it’s time to start thinking about how to set personal finance goals using the SMART goals method.

You’ll learn how to set your own financial goals, and how to maximize each one to make positive financial decisions and achieve success while managing money. Let’s dive in!

What’s a financial goal and why is it important?

A goal is defined as “an aim or desired result.” So if you’re running a marathon, the desired result is to cross the finish line. Financially speaking, the finish line can sometimes feel far away. That’s why it’s important to slow down, and focus on each individual step when setting your goals.

What’s the SMART goal method?

Specific

It’s all about being as precise as possible with your specific goal. Something like “get better with money” is too broad. Instead, saying “I want to reduce my credit card debt” clearly identifies your goal and plants the roots for success.

Measurable

Now think about how you’re going to track your goal and hold yourself accountable. “I want to reduce my credit card debt by $500” or “I will make my minimum payment every month” are tangible goals that you can manage and monitor continuously. It’s what building momentum is all about.

Achievable

This one’s arguably the most important. This SMART approach can only work if your goal is realistic and achievable. Something like “I want to reduce my credit card debt by $5,000” is ambitious, but it’s probably not practical if you can’t pay your rent at the end of the month. Make sure this goal is reasonable and achievable within your means.

Relevant

Choose a goal that matters at this stage of your life. If you need a car to get to work, then “reduce my credit card debt by $500 to help me qualify for a car loan" is an example of a goal that could help improve your current lifestyle.

Time-bound

Set a timeline for when you want to achieve your goal. Remember to keep it realistic and achievable. It’s better to say you’ll “reduce $500 in credit card debt by next summer” instead of “I’ll do it eventually.” Without a timeline, it’s harder to reach your goal.

Key takeaways: how to set up your own SMART goals

  1. Write down 3 SMART goals you want to accomplish and why.

  2. Go through each letter and make sure they meet the SMART criteria.

  3. Choose one SMART goal to focus on first before moving to the next.

Words of encouragement: goals help you win

People who have their goals written down and review them regularly are more likely to achieve them. Goals keep you anchored and guide your attention to help you reach the finish line.