If you want to take charge of your life, you need to set goals. This is a truism that applies to breaking a bad habit or being a better person just as much as it does to your financial life. Setting goals is the first step to getting where you need to go.
What comes as a surprise to many people, though, is that setting goals is more complicated than just saying “I’m going to fix my money problems” and calling it a day. If that was all it took, we’d all be living the life of Reilly — and you wouldn’t be reading this.
So what does it take to make a goal that will actually work for you? “SMART goals” are big in the business world, but they can also help you achieve your financial dreams. This powerful little acronym can help put you on the path to success when it comes to solving problems with your budget, income, credit score and more.
What Is a SMART Goal, Anyway?
SMART is an acronym designed to remind you of the steps required to turn a wishy-washy idea into a goal with detailed steps that will get you where you want to go. SMART stands for:
- Specific: Make your goal as specific as possible, narrowing your focus to a particular budget item or area of your finances to keep your eyes on the prize.
- Measurable: You’re dealing with dollars and cents here, so be sure to attach a number to your goal.
- Attainable: Keep in mind your particular circumstances and limitations of time, energy and resources as you make your goal. It’s good to stretch yourself, but a goal that’s too pie-in-the-sky to achieve will only frustrate you in the end.
- Relevant: It should go without saying that your goal should be something that will actually improve your quality of life. Forget about what your mom thinks will make you look successful and focus on your own needs and desires.
- Time-based: You need to give yourself a timetable and some benchmarks to meet along the way to help stay on track and make your goal easier to accomplish.
With these five tips in mind, you’re ready to write down a truly useful goal that has some built-in keys to success.
How to Craft a SMART Financial Goal, Step by Step
- Start General, Then Add Specifics
First, think of what you want most out of your financial life. Is it a better credit score? A more workable budget? A nest egg for retirement? Choose an area of focus.
For example, let’s go with one of the most common financial goals around: building savings. On its own, that’s pretty vague. To make this goal more actionable, it needs some detail. So think about your specific needs and goals to get focused.
For example, let’s say your goal is to save up for a vacation; in particular, a cruise to Bermuda. That’s much more specific, and sets the stage for doing some research in the next step.