How to set SMART financial goals

"A goal without a plan is just a dream." - Brian Tracy

Most people have a general idea of what they want their financial futures to look like:

• I want to save more
• I want to invest regularly
• I just want be less stressed 😅

But few people ever achieve these things.

Why?

Because they're too vague.

The very first step to making your financial dreams a reality is to turn those fuzzy aspirations into clear and actionable goals.

That's where the SMART framework comes in.

Setting SMART Goals

The SMART framework is a method for defining goals. It doesn't just cover what the goal is, but also how you're going to get there and how you're going to measure your progress.

SMART is an acronym for Specific, Measurable, Achievable, Realistic, and Timely.

Applied to a financial setting, a SMART goal looks like this:

• I will save $50,000 for a house deposit (specific) by June 2028 (timely).
• I will do this by opening a high-yield savings account with my bank (measurable) and setting up an automatic transfer of $2,000 per month (achievable).
• I can afford this based on my current salary of $70,000 (realistic).

Let's break this down further and see how you can come up with each of the components of a SMART goal.

🎯 Specific

The first step is to define exactly what you want.

A goal like "I want to save more money" is not actionable because it's too vague.

We need to have a clear target if we're ever going to hit it.

What is going to make you feel less stressed? Why do you want to get better at spending? Why do you want to start investing?

Once you know exactly what it is you want to achieve, give it a dollar value.

Here's what that looks like:

❌ Not specific

“I want to save more money.”

✅ Specific

“I want to save $10,000 for an emergency fund.”

📏 Measurable

If you can’t measure progress, you can’t stay motivated.

This step involves defining how you're going to track your progress and keep yourself accountable.

In a financial context, this one's usually easy.

If you're saving or investing, you can measure your progress through your bank or broker account.

To make it really clear, you could open a brand new account just for this goal.

Most banking apps also have features that let you set monetary goals and keep track of your progress.

🏆 Achievable

The journey is just as important as the destination.

That's why achievable goals include practical steps that you will take to achieve them.

Break it down into specific steps that you can take now and every week/month from now.

Practical steps could be opening a new account, setting up a recurring transfer, or asking your boss to pay a portion of your salary somewhere else.

If it's a recurring transfer or investment, make sure you define exactly how much and how often you'll do it.

🤔 Realistic

Ambitious goals are great. Unrealistic ones are not.

A goal should push you slightly beyond where you are now, but still be achievable within your current situation.

A goal should force you to bend, not break.

❌ Not realistic

“I’ll invest $2,000 a month” (on a $60k salary with rent and bills)

✅ Realistic

“I’ll invest $300 a month which is 10% of my income.”

⏳ Timely

Without a deadline, goals tend to drift away and be forgotten.

That's why it's essential to define exactly when you want to achieve your goals by.

It doesn't have to be down to the exact time and date. A month and a year is usually good enough.

This also ties in with keeping your goals realistic.

Consider a deadline that doesn't demand saving 100% of your income for 6 months straight (unrealistic), but is not so far away that there's no sense of urgency or motivation.

Other Recommendations

Write your goals down

Unless you have perfect memory, goals kept in your head are almost guaranteed to fade away.

Writing your goals down with pen and paper makes them real, and you're more likely to stick to them.

Review periodically

If you really wanted to achieve your goal, you could convince yourself that the world will end unless you do exactly what you said you would.

But in reality, that's not true.

Your financial circumstances could change, you may have an unforeseen expense, or you may simply change your mind about what you want.

That's why it's important to review your goals regularly to ensure they're still what you want to achieve and are not putting an unreasonable strain on your finances.

Give yourself a few months to try your new goals on for size. Then, if you need to, here are some levers you can pull:

• Adjust your target
• Change how much you're putting aside each week/month
• Push your deadline back