There are many seasons of life where we find ourselves setting goals for ourselves, whether we call them that or not. If you're hoping to buy a house, go to school, or are simply inspired by the new year, setting goals to accomplish your financial dreams can help you reach success. We're big fans of setting S.M.A.R.T. goals because they help you plan how to reach your goal. S.M.A.R.T. is an acronym for Specific, Measurable, Attainable, Relevant, and Time-Bound. Let's dive into what S.M.A.R.T. goals entail.
Specific: This section of your S.M.A.R.T. goal should include information like:
- Why are you setting this goal?
- What steps you're taking to reach the goal?
- Who will be involved? If this goal involves you, your spouse, or your kids, then include them when writing it.
Measurable: The measurable section of your goal explains how you'll measure the completion of your goal. If you're trying to save a specific amount or pay off debt, these numbers will be pretty straightforward. If you're working towards larger goals like purchasing a home, adding milestones like saving for your down payment, meeting with a mortgage loan officer, and meeting with a realtor might be some milestones you hope to add.
Achievable: The achievable section of your goal should explain why this goal is reasonable for you to achieve. Your achievable section should answer the following:
- Why are you confident you will reach your goal?
- What steps will you take to reach your goal?
- What skills do you have to reach your goal?
Relevant: Explaining your goal's relevancy will provide more weight to its importance to you.
Time-Bound: Creating a deadline for your goal will keep you from pushing it off. Once you reach your deadline, you can evaluate the success of your goal.
Setting goals helps keep you motivated and disciplined as you achieve your goals. If you use the S.M.A.R.T. goal-setting strategy, you'll be able to clearly see the path that will lead you to your goal.
Here are some examples of different financial goals you might set for yourself using the S.M.A.R.T. goal-setting strategy:
Example #1
Goal: Build my emergency savings.
Specific: It's important to have emergency savings set aside in case of an unexpected expense or loss of income. Over the next year, I'll set aside at least $250 a month so that this time next year, my emergency savings will be at least $3,000. I'll set aside this extra cash by budgeting my money and putting it in a savings account.
Measurable: I will know I have met this goal when my emergency savings has grown to $3,000. I will know I'm on track to reach my goal if my savings goes up by $250 increments on my monthly statement from P1FCU.
Achievable: I know I can reach this goal because $250 is a reasonable amount of my budget to set aside each month. I will budget using the 50/30/20 strategy, putting 50% of my income toward expenses, 30% towards wants, and the other 20% towards my savings. I can use this financial calculator to ensure I'm budgeting how I'd like to.
Relevant: I don't have an emergency savings account right now, so it's important for me to have some emergency savings set aside.
Time-Bound: By this time next year, I will have saved $3,000 for my emergency savings.
Example #2
Specific: I want to buy a home this year.
Measurable: I will know I've met my goal when I finalize a deal with my realtor. Some milestones to meet along the way include:
- Building enough savings for a down payment.
- Applying for a mortgage.
- Getting preapproved.
- Searching for homes with my realtor.
- Making an offer.
Achievable: I will be able to achieve this goal this year because I've already been saving for a down payment, and my credit is in good shape. I'll make sure I have enough for a down payment by automating my savings. I'll meet my milestones by scheduling appointments with mortgage loan officers and realtors.
Relevant: It's time for me to buy a home because I don't want to rent anymore, and I would rather own my home and build equity.
Time-Bound: I would like to purchase and move into a home by the end of this year.
As you can see, setting goals can apply to nearly any scenario in life. If your goals involve saving or making a big purchase, be sure to check out our personal lending and higher dividend savings options by visiting our Personal page.
This is for educational purposes only and not financial advice.