“I want to save money!”
That’s a great goal, but how are you going to do it? How will you know you’re done? When it comes to creating a financial goal, it is better to set SMART goals.
- S - Specific: This tells you exactly what you want to accomplish, making it as detailed as possible.
- M - Measurable: This helps you monitor your performance and know if you are making progress on your goal.
- A - Achievable: This answers the question “Is my goal even possible?” It tells you how you’re going to do it.
- R - Realistic: This considers the limitations of your goal.
- T - Time-Bound: Gives your goal a deadline, to create urgency and accountability.
Let’s think about that goal from before. Instead of saying “I want to save money,” say “I will set aside three months of expenses in an emergency fund, by putting 10% of each paycheck into an emergency savings account for 12 months.” This goal is specific (three months of expenses), measurable (are you on track to have three months of expenses in savings?), achievable (if saving 10% still allows you to meet daily and monthly expenses), realistic (three months of expenses is a standard goal, while 20 years of expenses would be outlandish), and time-bound (you’re giving yourself 12 months to get there). It’s a SMART goal!
