Whenever you establish short-term, intermediate, and long-term goals for yourself, you should always make sure you are coming up with S.M.A.R.T. goals. By setting goals that are specific, measurable, achievable, realistic, and timely, you are increasing the likelihood that you will actually achieve them. This same concept can certainly be applied to financial goals. Here’s how:
Specific
Say for example you are striving to “save more money in 2017.” This goal alone would not be categorized as a SMART goal because it is not specific. Instead, you should work toward “increasing your 2017 savings account balance by reducing food & beverage, shopping, and vacation expenses.” This way, you are not only writing down a goal, but you are also setting up a plan to attain it. A plan increases likelihood of achievement. With the first goal, you might not have any idea about where to start. In terms of the latter, you are specifically stating that you will reduce spending on food & beverage, shopping, and vacations.
Measurable
Although your goal of “increasing your 2017 savings account balance by reducing food & beverage, shopping, and vacation expenses” is now considered to be specific, it is not yet measurable. In order to account for this, you can say that you wish to “add $15,000 to 2017 savings account balance by reducing food & beverage by $4,000, shopping by $6,000, and vacation by $5,000.” A small adjustment of this nature can make you more motivated to achieve your goal by giving you measurable benchmark to work from. This way, you will be more inclined to continuously save more and more money until you pass the $15,000 amount.
Achievable
Before working toward a goal, you must make sure that it is possible for you to achieve. Sticking with our current example, you should assess whether you would be able to reduce food & beverage, shopping, and vacation expenses by the indicated amounts. Based on your given salary and expenses, is it possible for you to save $15,000? If the answer to this question is yes, then the goal passes the “A” component of the SMART goal requirements.
Realistic
In addition to being achievable, a goal must be realistic. Ask yourself if, after planning properly and monitoring your spending habits, you would be able to save $15,000 in a year. You should have answered yes to that question in order to categorize your goal as realistic.
Timely
SMART goals should always have a timeframe of when they should be achieved by. For example, you can specify that you would like to “save $15,000 by reducing food & beverage by $4,000, shopping by $6,000, and vacation by $5,000 from now until the end of year 2017.” If you don’t try to complete this within the year, you will be less motivated and drag everything out over a longer period of time and in turn prevent yourself from reaching your fullest potential in achieving your financial goals.
When planning your finances and setting financial goals, always remember to be SMART!
For more on goal setting and what goals you should be looking at check out these other great articles.
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