Setting goals is an important aspect of business, financial and personal day-to-day life. It’s like a map that provides you with the way and direction to achieve your targets. And there’s hardly a better way of setting goals than the SMART goals setting method.
Rather than setting vague, arbitrary goals, SMART goals focus on making the process more specific and achievable. The way you set your financial goals has a lot to do with whether you can achieve these goals.
In this article, let’s see all about how you can set SMART financial goals and use this as a way to boost your wealth.
Read also: 6 Money Habits of People with Financial Stability
What Are SMART Goals
A SMART goal is a help guide for goal setting. With SMART financial goals, you can establish clear money objectives, gain better clarity with your ideas, allocate resources more effectively, and more.
SMART goals stand for:
- S – Specific
- M – Measurable
- A – Achievable
- R – Realistic
- T – Timely
It is important to define these characteristics as they relate to your goal to ensure that your objectives can be achieved within a certain time frame. As a result of using this strategy, generalities and guesswork are eliminated, a precise timetable is established, and it is easier to track progress and discover missed milestones.
Why Is SMART Goals Setting Important?
All dreams come true when you turn them into goals. Ever wondered what’s the difference between someone who has everything and someone who has nothing? It’s probably the way they set and visualize their goals.
SMART goals setting aims to do exactly that. Everyone wants to pay off their student loans or lead a luxurious life. However, these vague goals often don’t turn into anything as you don’t have any concrete plans behind them.
Here are some benefits of SMART financial goals:
- Setting goals gives motivation
- Goals provide direction and focus
- Goals provide a sense of satisfaction
- Goals give clarity to the vision
How to Set SMART Goals
In this section, let’s discuss the specific process associated with SMART goals setting.
1. Build specific goals
Build goals that are specific and on point. Consider everything from what you to accomplish to why do you want to accomplish it. Specific goals have a much higher chance of being achieved in comparison to fuzzy or ambiguous goals. Write your goal down on our SMART goals worksheet and get started with a specific goal.
A good example of a specific goal in SMART goals setting may go like this – “I want to save $5,000 in my emergency savings fund in 12 months.” Or “I want to buy a new Porche Panamera.”
Here, you have a clear understanding of what your end result must be. Once that is done, you can start working on the ways to achieve this goal. When writing down your objective, be as specific as possible. This establishes more clarity in your goal-setting process.
2. Build measurable goals
Build goals with a form of criteria for measuring progress and time. Without one, tracking your progress can be quite difficult, and you can easily go off track. Ask yourself that how much time it can take to complete certain milestones of your goal and set relevant indicators for your progress.
Let’s go with the statement in the previous section for example. To build an emergency fund of $5,000 in a year, how much money should you save every month. This comes to $416 every month.
What sort of budget cuts should you make to save $416 every month? If you don’t have that kind of income, what other ways I can implement to increase my income (side hustles)?
By asking these questions, you make your goals measurable. When your goals are measurable, they are easily attainable.
3. Build achievable goals
Make sure that the goals you’re setting can be attained before working towards them. Firstly, realize the requirements and process of the goal and only then start working for it. Many individuals often set goals that don’t seem achievable in the first place and then end up suffering. See if you have what it takes to achieve that goal, and if not, then where are you missing?
Let’s consider the same example here as well – the goal of saving $5,000 in your emergency fund. Do you have enough disposable income ($415 a month) to make that happen?
If you don’t have it right now, what sort of plans do you have to increase your income? Can you bring it down slightly to make it achievable? Make sure you answer these questions when creating your SMART goals setting plan.
4. Keep your goals realistic
Keep your goals realistic and always consider the resources and time you have. Setting a goal way beyond your capabilities will fail. See that the goal is under your comfort zone and if you would be able to commit to achieving it.
SMART goals setting example for a realistic goal: Let’s say you’ve achieved your goal of saving $5,000 for your account. So, now you might increase this amount by a reasonable amount for the next period. An amount that seems realistic and reasonable.
5. Build goals that are focused and timely
And finally, make sure to keep your goals centered around the time you have. Goals without any “time” factor will not work for a number of reasons. When your goals are not time-bound, you are not likely to take the first steps toward achieving them.
So, write down every part of it on a SMART goals worksheet or a SMART goals template and keep on reviewing it from time to time.
SMART goals setting example for a Time-based goal: For instance, you want to save $50,000 within 5 years. Here, your plan should focus on how much money you can save every year, what business you should do, what type of sales you need to achieve your goals, etc.
Build Wealth with SMART Goals
SMART goals are not just designed for financial gains. These goals can be used for anything from weight loss to social media growth. Your first step begins with goal setting, and you work your way to achieve all these goals.
Your SMART financial goals don’t have to be limited to just one or two. You can set up many micro-goals as long as you have the vision and clear plans to achieve them all.
The SMART way of setting goals will speed your way to success by making goals that are specific, measurable, achievable, realistic, and timely. It’ll push you further helping you organize your goals better than ever before. Start implementing these goals in your financial life and see how it turns everything around to create wealth.
Don’t forget to download our FREE personal finance toolkit that can help you identify the best tools you can use to manage your wealth!