Making SMART Financial Goals
A goal without a SMART plan is merely a wish.
Many of us hear about setting SMART financial goals as the key to success, but how do we ensure these goals truly resonate with our unique financial journey?
Many of us emphasize that setting a goal is one of the first steps to success. However, what’s often overlooked is the process of creating a truly worthwhile goal.
Financial goals are the roadmap to a secure and independent future. They represent the specific, actionable steps you take to manage your money effectively, whether it’s building an emergency fund, paying off debt, or saving for retirement. Setting these goals is crucial because they give purpose to your financial decisions and help you stay focused on the bigger picture.
The power of financial goals lies in their deeply personal nature. They should reflect your unique values, priorities, and dreams—not someone else’s. Whether you’re aiming for financial freedom, a dream vacation, or peace of mind, your goals are as individual as you are.
Without clear financial goals, it’s easy to feel stuck—living paycheck to paycheck, falling behind on savings, or wondering where your money went at the end of each month. The good news? By setting intentional goals, you can take control of your finances and create a future that aligns with your vision.
Today, we will cover the different types of financial goals, how to create an effective goal, and common challenges we might face along the way.
Why Set Financial Goals?
There are plenty of studies that show we are more likely to achieve a goal that we write down and stick to. Financial goals are no different! Having a goal gives purpose to our financial journey. Goals can help create habits that stick with us for life.
When we set up clear goals, we are more likely to put in consistent effort to reach them as well. A well designed goal means we can track our progress along the way and adjust if needed. Ultimately, the way we set up our goals can either help or hinder our progress.
Types of Financial Goals
The easiest way to divide out your financial goals is by timeline. The 3 most common “types” of goals are short-term, medium-term, and long-term.
Short-Term Goals (0-2 years)
Short-term goals are more immediate and usually have an ending date of less than 3 years. These goals can range from building an emergency fund, paying off a credit card, or saving up for a vacation. Since they are shorter in length, oftentimes you might find yourself having multiple short-term goals happening concurrently.
Medium-Term Goals (3-5 years)
Medium-term goals consist of anything that takes some foresight and planning to achieve, but still will be happening within 6 years. These goals might be saving for a down payment, buying a car, or paying off student loans (or other personal debt). These goals benefit from having a longer timeline than short-term goals since they might require more funds to complete. However, these goals tend to be more tangible and specific than long-term goals.
Long-Term Goals (6+ years)
Long-term goals require significant planning and patience to work through them. These goals might require some estimates (retirement planning) or built-in vagueness (achieving financial independence). I find that for most people, a long-term goal is great to have going on in the background of your financial journey. Since it will take years to achieve, it is a perfect case to set up an automatic system and then “forget it” while you wait to reach your goal.
Get SMART With Your Goals
All goals you create should follow the SMART framework.
Specific: Be clear in what you want to achieve.
Measurable: Make sure to attach a metric you can measure over time (a dollar amount or percentage).
Achievable: Are you being realistic in this goal? An unrealistic goal can lead to getting off track.
Relevant: Make sure your goal aligns to what you want to achieve. Do you believe in the goal?
Time-bound: Set a deadline for the goal.
Don’t just make your goal to “save money”. Instead, a SMART goal might be to save $5,000 for an emergency fund in the next 12 months.
Prioritizing Goals
Life can be complicated and I am sure you won’t just have one goal you are making in life. It is important to always prioritize the goals you feel most passionate about. Life is full of trade-offs and it is important to think through yours when making decisions. Resources are limited in life, and it is important to use yours how you feel fit.
Creating a Plan
Working through your SMART goal is half the battle, but once created you then need to work on a plan to actually achieve the goal. Here are some tips that can help make the goal more achievable.
Milestones: Break your goal into more digestible pieces! Make checkpoints so you can not only track your progress, but also give yourself confidence that you are on track.
Automation: Creating automatic transfers can help hold you accountable for reaching your goal.
Resize your Budget: If the goal is pressing, try combing through your budget to refit any categories that you can afford. By giving yourself some more wiggle-room, you can help expedite your goal.
Track Progress: Make sure you are keeping up on your goal! Weekly or monthly check ins can help ensure you are on track to reach your goal.
Common Challenges
Goals can be difficult to keep, and falling behind can be disheartening. Below are some common challenges we face with our goals.
Lack of Motivation: If you find yourself not finding motivation to keep your goal, it might be a useful exercise to go back to the A and R of a SMART goal. Did you make an achievable goal? Also, is it relevant and something you want to drive towards? If not, it might be good to rewrite and focus on a new goal.
Unexpected Expenses: Unavoidable expenses happen, and can push back goals we might have for ourselves. If it is truly out of your control, give yourself grace and reset to a more reasonable timeline if needed. Having an emergency fund can help prepare against unexpected expenses, and make them less likely to impact your goals.
Feeling Overwhelmed: Like I mentioned, we might have multiple goals we are working towards at one time. It can be a lot of energy and mental capacity to work through the tradeoffs of these goals. If you feel overwhelmed, focus on one goal at a time. Breaking larger goals into smaller, more manageable steps can also help.
Adjust as Life Changes
Times change and our life evolves. Our goals should do the same as well! Make sure for goals with longer timelines you review and adjust periodically as life changes. As major life events happen, our priorities and timelines can change. These circumstances are a part of life and it is important to give ourselves grace and flexibility as we work through what is thrown at us.
Charting Your Path to Financial Success
Setting financial goals is crucial as they act as a roadmap to guide you toward financial success. By outlining clear goals, you create a path that keeps you focused and motivated, ensuring you're making intentional progress. Take the first step today by writing down one short-term, one medium-term, and one long-term goal. It doesn’t matter how big or small they are – what matters is getting started. Your financial journey begins with a single step. Each step you take today brings you closer to a secure and fulfilling financial future.
The details in this post are for educational purposes and may not be appropriate for your specific financial situation. Please always do your own research before making any investment decisions.
Please note that this post is not sponsored by any of the companies mentioned. All opinions and information shared are based on personal research and experiences.