Personal finance is important. More specifically, knowing what you want your personal finances to look like and knowing how to achieve that is important. Hitting your financial goals starts with making SMART goals. We’ll guide you through exactly how to set SMART financial goals
S: Specific
Setting a vague goal will only cause you confusion down the road. Begin by setting a clear and well-defined goal. Start with just one. For example, I will have 2 months of expenses in my emergency savings account by January 1st 2018. This goal has a specific date and a specific target. If you don’t know what you’re saving for and you don’t already have an emergency savings, start there. Having a safety net to fall on in hard times is essential and should be a part of your overall financial plan.
M: Measurable
Going with the goal mentioned previously, set measurable amounts you will put into this account on a weekly or monthly basis. By making your goal measurable, you decrease the risk of moving off track. If your goal is short-term like the one we’re working with, measure your progress weekly or bi-weekly to hold yourself accountable.
A: Attainable
Is your goal realistic? A great way to find out if your goal is actually attainable is to go over the timeline you’ve set and your monthly income. If at the end of each month you have less than $100 that can realistically go into savings, a $4,000 goal within 3 months is simply not realistic. A rule of thumb is to put 10% of your gross income into savings per month. As you get comfortable with this and your income increases, you can increase the amount going into savings. Be wary of putting too much into savings as this can lead to dipping into your savings account to cover expenses, which is something you want to avoid.
R: Relevant
How does this goal relate to your life and life goals? An emergency savings account can benefit almost anyone, but if your goal is to save for a convertible and you live in Alaska, you may want to change your goal, or your state. Make each financial goal relevant to where you are now, and where you want to be. By keeping your financial goals aligned with your life goals, you’re more likely to reach both!
T: Time-Bound
Every goal you set whether it is financial, personal or work-related, should have a deadline. Putting a hard stop on when you will hit your goal requires you to be accountable along the way. It also will create a sense of urgency and as the date comes ever closer, you will be more inclined to work towards the goal. Set reminders for yourself every week or month to be aware of your deadline. You should be measuring your progress along the way, but by having small reminders – you will keep yourself on track and you’ll be less likely to give up on the goal.
We are committed to helping our members create a healthy financial life for themselves and their families, for more tips on personal finance, check out our other blogs!