How To Set SMART Financial Goals

Setting objectives for your yearly financials is important because it helps your business run smoothly.

Learn how to set financial goals with examples and reasons why it matters here.

Why Set Financial Goals?

Everyone’s financial situation is different. Maybe you want to put a down payment on a home in the near future. Maybe you’re focused on saving for a child’s college education. Regardless if you have a hard list of financial goals written down or in your head, chances are that you’ve put some thought into what you want to be able to pay for going forward.

By evaluating your financial resources, investment products, personal loans, and purchases, you’ll begin to become more fluent in your financial standing and how you can best prepare for the future.

Setting actual financial goals will help you progress towards those goals in a realistic way. With goals in mind, you’ll have something to work towards and will be able to situate yourself in a much more stable financial standing.

The Keys to SMART Financial Goal-Setting 

If you haven’t heard about SMART goal setting before, now is a great time to learn more about this effective strategy to help you set and achieve your goals.

SMART is an acronym for Specific, Measurable, Attainable, Relevant, Timely. Each of the guidelines is digestible and actionable in order to ensure that you don’t get off track and can hold yourself accountable each step of the way

Specific

Specific goals are much less likely to fall by the wayside amidst the craziness of everyday life.

To get started, consider the five W’s:

• Who: Who is involved?
• What: What do I want to accomplish?
• Where: Location?
• Why: What’s the specific reason, purpose, or benefits for accomplishing the goal?
• When: What’s the time frame?

For example, instead of making a goal that you want to save more this year, consider getting more specific, and making a goal like saving a specific dollar amount per month in 2023. You might also consider making a goal that you want to hit a certain dollar amount in savings by a specific date, and keep the monthly/weekly allocations fluid.

Measurable

By creating a goal that is measurable, you’ll be able to monitor your progress and celebrate small wins. By celebrating the small wins and steps you’ve taken toward your goal, you’ll see the progress to increase your momentum toward achieving that goal.

If you’re trying to save for a trip in the fall, be sure to check in with your savings to see how you’re progressing.

Maybe you can review your savings and say, “wow, look at that, I saved enough to purchase flights!” or “I’ve now saved enough to pay for accommodations.” Measuring progress will help you maintain consistency while working towards your financial goals.

Attainable

Ultimately, it’s important that your goals are attainable. For example, setting a goal of saving 50% of your income might not be attainable if your salary doesn’t adequately provide you with a lot of disposable income—especially if your cost of living is high.

Instead, focus on keeping your goals realistic. If you’re not realistic when setting your goals, you’ll have a hard time reaching them, which ca be extremely discouraging.

Relevant

Consider how your goal relates to your personal or professional goals. How is it pushing you forward? When setting goals, creating goals with your short-term and long-term goals in mind will help increase your accountability and enthusiasm for reaching those goals.

Timely

By creating a timeline for your goals, you’re increasing accountability and ensuring that you won’t just push goals off repeatedly. If you anchor your goal with a timeframe, you can set yourself up for success mentally.

This will drive your unconscious mind into motion to begin working on the goal before the deadline you’ve assigned.

Types of Financial Goals to Set

Lifetime Goals

When thinking about lifetime goals, it’s a good idea to consider how you want your life to look. Lifetime goals are based on what you want to achieve in your lifetime, so they’re on a much more long-term scale. 

Because you have more time to achieve these goals (a whole lifetime, to be exact), you can go big with your dreams. These lifetime goals will often look different for everyone. They’ll likely evolve based on your life stages. 

Lifetime goals might include: 

• Living in a certain location
• Owning a home
• Having the financial security to be able to travel
• Having a certain amount of disposable income

Long-Term Goals

Long-term goals are those you want to accomplish in the future that you can take actionable steps to achieve through short-term goals. These may seem similar to lifetime goals, but the main difference is that life goals are broader and grander in scope than long-term goals.

Long-term goals might include:

• Paying off school loans
• Saving enough money to make a down payment on a home
• Starting a college fund for your children

Short-Term Goals

Short-term goals are goals you want to accomplish in the short term or soon. Think six months to a year. These goals are just as important as long-term goals because they act as stepping stones toward your larger goals.

Some short-term goals might include:

• Saving $1,000 in your emergency fund this year
• Allocating a set percentage of your income to go to your 401K or IRA 
• Saving enough money to take a vacation this year

How to Set Short-Term Financial Goals

Your financial goals are unique to you, your situation, and your priorities.

You may not have the same financial priorities as your friends, and that’s okay as long as you feel good about the financial choices you’re making.

For short-term goals in particular, it’s important to evaluate your spending patterns, determine what is most important to you, and set short-term financial goals that align with that information.

For example, it might be your priority to take a vacation once a quarter or once a year. If that is the case, you might consider setting a goal to save enough money to take those vacations as you wish. This might look like setting money aside in a high-yield savings account, or putting a percentage of your income into a savings account you’ve delegated specifically for travel savings.

On the flip side, your priority might be to pay your mortgage with additional money towards the principal each month. If this is the case, determine your minimum mortgage payment along with how much more you want to pay towards the principle in order to properly set your goal and make it achievable based on your spending patterns.

How to Set Long-Term Financial Goals

When setting long-term financial goals, it’s important to visualize where you want to be 5-10 years from now.

Do you want to live in a specific area with a specific standard of living? Would you like to own a home? Do you want to work less?

The first step in setting long-term financial goals is visualizing where you want to be. Once you have the visuals down, you can work backward and see what goals and/or milestones you need to hit to achieve those goals.

For example, if you want to live in Los Angeles and own a home in the next five years, consider what it will take to achieve that goal. You’ll need to put a down payment on a home, have enough disposable income to pay the monthly mortgage, and will need to be in a job that is either local or allows for remote work. 

Knowing this, your goals might look like this:

• Save enough money to have a down payment based on the average home price in your desired area
• Reallocate your spending to ensure that you have enough disposable income to afford your mortgage
• Start an emergency fund so that you have a fallback in case your disposable income changes suddenly or you have an unexpected expense

How to Set ​​​​​Ongoing Financial Goals 

One of the most common ongoing financial goals to set is to stick to a budget.

This can be incredibly challenging if you haven’t set or stuck to a budget in the past. With this said, setting and sticking to a budget is a good financial habit to implement.

If you are struggling with your finances, a good goal to set might be to speak with a financial advisor or money coach. Doing so can help you gain a better understanding of your finances and spending habits. Additionally, these professionals can help you set realistic financial goals and implement good money habits.

Checking on your personal finances before making impulse decisions can be a great ongoing financial goal to set because it encourages ongoing accountability. 

How to Set Credit Card-Based Financial Goals 

If you’ve let your credit card spending get a little out of hand, you’re not alone. It’s estimated that the average American had $5,525 in credit card debt in 2021. With this number in mind, reducing debt is a priority for about 70% of Americans.

Setting credit card-based financial goals might look different based on your spending and debt, but a good rule of thumb is to try to pay off as much debt as possible, as credit card debt can be very costly.

Goals to Pay off Credit Card Debt

Paying off credit card debt can be overwhelming. Instead of considering the big looming number, try breaking it up into small and achievable goals.

First, set a goal to pay more than the minimum amount you owe on your credit card. Even if it’s a small amount more, paying more than the minimum on your credit card balance will help chip away at your debt.

Assess your debt and break it up into manageable pieces. What can you realistically pay for each month? Is there an expense that you can eliminate and put that money toward your credit card debt? When you break up the total cost into bite-sized pieces, it becomes more attainable.

If you can, automate your payments to avoid late fees. This will ensure that your payments get in on time and without hassle.

NerdWallet suggests reaching out to creditors to explain your situation and see if you can find a solution to lower your debt or decrease the interest rate. A credit card issuer may be willing to negotiate payment terms or offer a hardship program, especially if you’re a longtime customer with a good track record of payments.

Goals to Minimize Credit Card Use

When you want to minimize credit card use, consider treating your credit card as if it were in fact a debit card. Only use your credit card to make purchases that you can pay off in full. Instead of making that impulse buy at the store, take a moment to consider if you would make the purchase using your debit card.

Goals to Use Credit Cards Wisely

While credit cards can get you into trouble if you’re not managing your spending properly, they can also be incredibly beneficial financial tools to help you achieve your financial goals.

Assuming that you treat your credit card as a debit card and only use it for purchases that you can afford, using your credit card can have huge perks.

When automating your payments, consider using your credit card when possible. This will help you avoid late fees, can ensure that you have clear records of all of your monthly payments, and can give you points/perks. Many credit cards now track monthly payments and will notify you if your monthly payment changes at all, which is extremely helpful if you want to monitor your bills like your utilities. 

Additionally, using your credit cards can help you reach those short and long-term goals we talked about earlier. Like to travel and want to save for a vacation? Opt for a credit card that gives you travel points! Using your credit card wisely and accumulating points that can be redeemed for travel expenses can help you achieve your travel goal. A credit card with travel points can also help you save money on the total cost of the trip.

If traveling isn’t your main priority, consider credit cards that give you other perks based on your spending habits and financial goals.

How to Set Savings Goals 

Your savings might revolve around an emergency fund, a mortgage, a vacation, a college savings account, or many other things. You may have to get creative with your savings plan. Regardless of what you want to save for, creating a deadline for yourself will help motivate you to achieve these goals.

How to Set Time-Bound Savings Goals 

First, define your goal (see above), then give yourself a deadline. Is this a short-term goal, a long-term goal, or an ongoing goal? Determining your deadline will help create milestones and allow you to build a roadmap toward this goal.

Consider using a high-yield savings account to gain interest on your savings. Most accounts allow you to see your year-to-date interest and monthly interest which can be extremely motivating. The more you save, the more interest your money accrues, and the more in savings you have. It’s a win-win for everyone! Once you achieve your savings goal, you can continue, or redirect your focus to another savings goal. 

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This article was written by The Salary Project writer, Michele Lando.