Your guide to setting S.M.A.R.T. financial goals

Having realistic financial goals and following through on them is not something most of us do well. To help turn our financial goals into targets, we need to incorporate certain metrics in the way we plan things and stay committed to success.

S.M.A.R.T. is a pneumonic that can help you remember how to keep your financial journey on track. In this article, we’re going to explore what each of these letters stand for and how you can incorporate them in your personal financial journey.

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What are S.M.A.R.T. financial goals?

Here is what the abbreviation means:

S is for Specific – Vagueness is the enemy of progress. Instead of wishing for financial security, it’s better to get specific! Part of being specific is identifying what it is you want to tackle – is it building an emergency fund, saving for a vacation, or finally tackling credit card debt?

M is for Measurable – How will you know if you’re winning? Measuring your results is also a great way to stay motivated.

A is for Achievable – While social media can fuel unrealistic expectations of doubling or tripling your investments in a year, these are not realistic goals for the average person. It is important to be honest with yourself about your resources and investment horizon.

R is for Relevant – Ask yourself: Does your goal resonate with your values and priorities?

T is for Time-bound – Deadlines create a sense of urgency. Setting a timeframe keeps you focused and helps you celebrate milestones.

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Incorporating S.M.A.R.T. into your financial journey

Now that you know what each of the letters mean, it’s time to understand how you can use these insights in real life to make your financial journey better.

Here are a few general tips that you can incorporate into your daily life:

• Automate your finances – There are several apps today that will let you automate your finances across savings and investments. They do all the work and you just have to sit back and watch. By automating how money moves from your checking account to savings and further to your portfolio, everything becomes effortless. Over time, you get used to the amount of discretionary income you have left and adjust your lifestyle accordingly.
  
• Embrace technology across your finances – This is an extension of the point above. By opting for more user-friendly apps and brokerages, you make life easier for yourself. This could include setting up automatic payments for your credit card, mortgage, etc.
  
• 50/30/20 Rule – Allocate 50% of your income to essential needs (housing, food, bills), 30% to wants (entertainment, dining out), and 20% to savings and debt repayment. This flexible framework helps prioritise saving even with limited income.
  
• Negotiate your interest rates – Don’t be afraid to call your creditors and negotiate lower interest rates. Explain your commitment to repayment and ask for a better deal. You might be surprised what you can achieve.
  
• Set up a monthly budget – It might take some time to figure out how much money you need to spend everywhere, but when the structure is ready, all you have to do is adjust it every month. You don’t have to do it every day – once a month should suffice.

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Important points to consider

Keep in mind that your goals are probably very different from any other person’s. For instance, a middle aged woman trying to save up for retirement and taking care of two kids is going to have a very different monthly budget compared to a college student.

Make sure you’re aware of your personal constraints, income, and spending habits when drawing up a monthly budget. You don’t want to overspend, but don’t want to be miserable either.