Financial experts have all kinds of tricks up their sleeves when it comes to managing finances, and they know all the right money hacks and methods to stay on track. One of their secret weapons for financial planning is SMART Goals. “I’ve found SMART goals to be extremely helpful in developing financial plans for both individuals and businesses,” said Ben Klesinger, founder and CEO at Reliant Insurance Group and Helping Hand Financial. “Setting Specific, Measurable, Achievable, Relevant, and Time-bound goals helps provide clarity and accountability.” For example, he said a SMART goal for an individual to work toward getting out of high-interest debt might be: “I will pay off $20,000 of my outstanding credit card balances within 18 months by making minimum payments of $1,100 per month.” This goal is specific in the amount and timeline, measurable in the minimum monthly payment, achievable with discipline, relevant to the broader goal of paying down debt, and time-bound with an end date.
1. Begin with a Broad Vision, Then Segment It
The key, according to Klesinger, is to start with your broader vision or objective, then break that down into concrete SMART goals. “Review and revise these goals regularly based on your progress and any changes in priorities,” he said. “SMART goals, when used properly, are a simple but highly effective tool for achieving financial success.” SMART in goal-setting stands for Specific, Measurable, Achievable, Relevant, and Time-bound. SMART goals are often used for getting healthy, and career growth, and are also important when working on achieving financial goals.
Starting with a broad vision enables you to see the bigger picture and provide a clear direction for your financial journey. Begin by identifying your long-term financial goals, such as saving for retirement, buying a new home, or starting a business. This broader vision serves as the foundation upon which you can build more targeted and actionable steps. Once you have established your overarching objective, the next step is to break it down into more manageable components that align with the SMART criteria.
2. Define the Goals Specifically
Ask yourself what particular objective you wish to achieve, such as buying a new home, reducing debt, or saving for retirement. Identify the goal and then focus on making it very specific. A goal that is precise can be easily measured and celebrated when reached. Specificity is crucial because it transforms vague intentions into clear, actionable plans. For example, instead of setting a general goal to “save money,” decide to “save $10,000 for a down payment on a house within two years.”
By honing in on specific details, you bring clarity to your financial objectives and can better track your progress. A specific goal reduces ambiguity, making it easier to determine the exact steps needed to achieve it. This approach also sets a clear benchmark for success, which can be motivating and provide a sense of direction. Implementing specific goals ensures that you are not just aimlessly working towards an undefined target, but instead making tangible strides toward a well-defined financial milestone.
3. Divide Goals into Smaller Steps
Breaking down the main goal into smaller, manageable parts is a practical way to make a seemingly daunting task more achievable. For instance, if your goal is to save a significant amount of money, setting smaller targets like saving a certain amount each month or week can make the process feel much more manageable. This approach not only makes your goals feel less overwhelming but also allows you to monitor your progress more closely and celebrate small victories along the way.
Smaller, incremental steps contribute to a sense of achievement and keep you motivated throughout your financial journey. For example, if your broader goal is to save $20,000 by the end of two years, you can break this down into saving approximately $833 each month. This monthly target can further be divided into weekly savings goals, making it easier to stay on track. By focusing on these smaller milestones, you can also better accommodate any changes in income or unexpected expenses that may arise, allowing you to adjust your plan without losing sight of your ultimate goal.
4. Set a Time-Limited Objective
Establishing a timeline for your goals is essential as it provides a clear deadline to work towards and fosters a sense of urgency. A time-bound goal is one where the target date or time frame for achieving it is clearly defined. This aspect of SMART goals ensures that you stay committed and maintain momentum towards accomplishing your financial objectives. For instance, instead of merely aiming to “reduce debt,” decide to “pay off $5,000 in credit card debt within 12 months.”
Time-limited objectives also allow you to track your progress effectively, making it easier to assess whether you are on schedule or need to make adjustments. Dividing your goal into smaller parts will enable you to celebrate small achievements and get back on track if you miss a target. For example, if you set a goal to save a specific amount each month, you can regularly evaluate your progress and make necessary adjustments to stay on course. Celebrating these smaller wins can boost your morale and reinforce your commitment to achieving your overall financial goals.
5. Revise and Celebrate Achievements
Regularly revising your goals and celebrating milestones as you achieve them is crucial for maintaining motivation and ensuring long-term success. Periodically assess your progress and make any necessary adjustments to your goals based on changes in your financial situation or priorities. This ongoing evaluation helps you stay flexible and adaptable, allowing you to navigate any setbacks or challenges that may arise.
Celebrating milestones, no matter how small, can provide a sense of accomplishment and reinforce positive financial habits. Recognizing your achievements keeps you motivated and encourages you to continue working towards your broader financial objectives. For instance, if you’ve successfully saved a specific amount each month or paid off a portion of your debt, take the time to acknowledge and celebrate your progress. These small celebrations can help maintain your enthusiasm and momentum, ultimately leading to greater financial success.
By following the SMART methodology and breaking down your financial goals into specific, manageable steps, you can create a clear roadmap for achieving your objectives. Regularly reviewing and adjusting your goals, while celebrating each milestone, will keep you motivated and committed to your financial planning journey. This approach not only simplifies the process but also increases your chances of long-term success, ensuring you stay on track towards achieving your financial dreams.
