How to Set SMART Financial Goals

An important factor in achieving financial success is setting good goals that you can work toward. Like traveling, you can get to where you want quicker if you know where you are going instead of wandering about aimlessly. However, you can’t just say that your goal is to retire rich someday. For a goal to be effective, it has to be SMART — i.e., Specific, Measurable, Actionable, Realistic, and Timely.


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Making Your Financial Goals S.M.A.R.T

What are SMART goals exactly? SMART is an acronym to help you create high quality goals so that you have a greater chance of achieving them.

  • Specific – A goal should be specific enough so that you can measure and track your progress, and be accountable. For example, instead of saying you want to be “rich”, you can state that you want to have $1 million in 10 years.
  • Measurable – A goal should have concrete measurement. For example, “rich” is not a measurable goal, but “$1 million” is.
  • Actionable – A goal should be attainable or actionable. This means that you can take practical steps toward achieving your goal — i.e., figure out how to make it comes true. For example, to have $1 million, you’ll have to reduce your expenses, save money, invest, and let compounding works for you over time.
  • Realistic – A goal has to be within the realm of possibility. In general, it’s better to take 10 smaller steps than one huge leap. For example, $1 million might not be realistic and you might consider saving $10,000 first. Once you reach $10,000, you can up the ante to $50,000, etc.
  • Timely – A goal should be grounded within a time frame. For example, saving $1 million without time frame attached to it is not a good goal, but saving $1 million in 10 years is grounded with a time frame and is a better goal.

Types of Financial Goals

There are many types of financial goals. Here are some of more common goals and sample SMART goal statements:

  • Get out of debt — “I will completely eliminate my $5,000 credit card debt in 3 years.”
  • Saving for retirement — “I will save $2,250,000 in retirement fund within 35 years.”
  • Saving for college education — “I will save $100,000 in college fund for my son within 15 years.”
  • Saving for a down payment for your home — “I will save $50,000 in 5 years for down payment on my first home.”
  • Saving for a down payment for your car — “I will save $5,000 in 1 year for down payment on my new car.”
  • Etc.

After you set your goals, the next step is to prioritize them. Although it’s nice to be able to accomplish them all, sometimes that is simply not possible. You may have to make some changes and accept some compromise. After your goals are prioritized, the next step is to review them and identify actions you should take to accomplish each goal.

Here are a few more articles on financial goal setting:

Please feel free to share your SMART financial goals below.

About the Author

By , on Apr 30, 2009
Pinyo is the owner of Moolanomy Personal Finance. He is a licensed Realtor specializing in residential homes in the Northern Virginia area. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, and financial literacy author.

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Leave Your Comment (2 Comments)

  1. Dawn says:

    These are the same kinds of goal setting techniques that I use in management, however, I never had an acronym for them before, probably because I do have the accountability aspect in there like Coupon Artist mentioned. But now I can talk about setting A SMART goal – great!

  2. Baker says:

    This is such helpful information. A lot of time I find myself frequently setting goals, but not making them specific or measurable enough. It helps so much to actually put a number and a date with all your goals!

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