Setting SMART Financial Goals
I’m sure we all have a vision of how we would like our lives to be like in the future but may not know how to achieve it. Are you wondering how to start your financial independence journey? One way to get there is by first setting SMART financial independence goals.
Why SMART Goals are helpful
If our goals are not feasible, we may end up feeling discouraged every time we are unable to achieve them. By setting SMART goals, our goals become more feasible and realistic. We are also sure of the details such as how we will be going about to achieve them and how we know we have reached them. This helps us feel more motivated. Over time, we can then achieve our financial milestones that enable us to become independent. Try setting your own SMART financial goals today!
What Are SMART Goals?
Have you ever tried setting a goal for yourself but giving up or feeling frustrated when you don’t achieve it? Consider using the SMART framework in setting goals. This way, you will be able to plan your finances clearly and realistically. The SMART framework is a good one to follow as it is easy to remember and execute. Compared to other goal setting frameworks, it does not require you to understand difficult theory. At the same time, it still ensures that you have the necessary fundamentals for your goal to work. Other goal setting methods, like The Goal Pyramid, only help in prioritising your goals and fail to dive into the details that will actually help you achieve them.
John has started working part-time and wants to set a savings goal for himself. He earns $20 a week and works every week for two months. In order to make sure his goal is feasible, he can check them against the SMART framework.
|Before using the SMART Framework
|After using the SMART framework:
|“I want to save money”
|“I want to save $50 in two months by saving $25 from his income each month before spending.”
|This goal provides a direction for him to start taking action. However, it lacks the details that will help put his plan to action. He has to make his goal more specific, measurable and time-bound. Without any clear direction, John might end up only putting aside whatever is left after spending. Even though he works two months, he may not save with each paycheck, and may only remember to save in the last month. Without knowing the details of his plan, he does not have a clear structure to follow and it is easy for him to get sidetracked and unmotivated.
|Specific: The goal is specific as John knows how he is going to reach his goal and when it’s achieved. This is important as he will be able to follow his specific plan more accurately. This will help to stay on track and stay motivated.Measurable: He now knows exactly how much money he wants to save and how much money he plans to save each month. This is important as now he knows what his goal is and how to achieve his goal. This also helps to keep him accountable. Time-bound: He knows when he wants to achieve this goal by. This is important as he can now track his progress against the timeline. The time constraint can also act as pressure for him to stick to his plan.
Before locking in your SMART financial independence goals, make sure to check out this article 3 Common Money Management Advice You Might Want To Reconsider Following! This will help you to avoid setting goals based on common misconceptions.
Also, if you feel time-pressed or in a hurry to take action instead of planning, remember that when you fail to plan, you plan to fail. Taking time out to set your goals and create a plan on how to achieve them is the key to achieving your goals. Need help on time? here’s a good article from our partner Not So Crazy Rich Asians on how you can better manage your time!