Setting SMART Money Goals

Buy a car. Save for a house. Pay for higher education. Open an investment account. Travel abroad. Get married. Start a family. Retire. 

Do you have financial goals you want to achieve but feel like no matter how much money you make, it’s never enough? If so, it’s time to rethink your view of money and reframe your mindset… it time to… dare I say… set SMART money goals! 

If you’ve ever worked in an office you may have encountered corporate America’s obsession with the term “SMART goals.” SMART is an acronym that stands for specific, measurable, achievable, realistic, and timely. However, we developed our own moniker and took it a step further with a little financial spin. A SMARTER money goal is specific, measurable, attainable, relevant, timely, and something that you can evaluate and reevaluate. 

In this post we will guide you on how to put your objectives into action in hopes of sparking some achievable goals for yourself. 

Formulating your money goals

Many of us are used to making decisions based on what we see our neighbors, friends, or coworkers doing and buying. Or maybe we’re following the lead of whatever media companies are feeding us. We’re bombarded daily with a constant stream of goods based on digital marketing algorithms. And unfortunately, we haven’t taken enough time to figure out if this is actually adding to our happiness and satisfaction.

So…what exactly does it mean to formulate money goals in the first place? After all, it’s tough to reevaluate a goal if you haven’t even created one to begin with. The first step we’d recommend for folks is to spend some time in deep introspection. Weird thing to hear in an article about money, right!? But the truth is that it proves challenging to create proper goals without knowing yourself first. 

However, before you can realistically proclaim your money goals, it would be wise and most beneficial to contemplate why it’s so important for you to achieve them. 

Determine your Why

It’s difficult to do anything well if you don’t know why you’re doing it to begin with. Perhaps you can recall those frustrating days in school when your teacher dumped “busy work” on you. You probably didn’t care about those assignments and in all likelihood you learned less because you realized that the busy work wasn’t important or interesting. That’s because the busy work wasn’t helping you reach your end goal.

On the flip side, the best teachers were the ones who gave assignments and could clearly explain why it’s important. Knowing the why can make all the difference in terms of motivation and success.

So, what is the why behind your money goals? Why are you trying to earn more, spend less, and grow wealth? Money itself isn’t a great end goal.

Real world example: Perhaps your goal is to “get out of debt.” But just having that goal with no specific (and personal) why will be difficult to achieve. Instead, maybe the why of crushing your debt is so you can go on more care-free vacations, or so you can have more money to buy your partner fresh flowers. Reminding yourself of a very specific why will be a driving force in achieving the goal of getting out of debt.

Everyone is different. And if we follow the stock lifestyle that our peers are pursuing, we’re likely to choose the wrong goals for ourselves. Have you always wanted to start your own business? Start saving for that!

In order to figure out your why and your goals, it’s important to look inward, not outward. Don’t be inhibited by your friends or what you see around you. Think big about what your life could look like. And realize that you can make meaningful changes by consistently taking action.

SMART Money Goals:

All right, now that you understand that having a why is essential to motivation, it’s time to get practical! This is where the SMART money goals approach can serve you best. My company has used the SMART goal system in the office for years, and while I’ve actually seen it fail in many ways at the corporate level, at an individual or family level it works a whole lot better. 

S = Specific

We used the example above of “getting out of debt,” but even that goal is a little vague. Instead, let’s set something more specific to work on. A better way we could phrase the goal could be to say, “I am going to pay off $13,000 of credit card debt.”

You’ll be much more successful if your goal is specific.

M = Measurable

While this can be closely related to “specific,” oftentimes it boils down to two factors that we need to make sure are measurable – time and a dollar amount. So, in this case we’d take the previous example with the specific dollar amount of $13,000, and then set a period of time to accompany it. “I am going to pay off $13,000 of credit card debt before my birthday next year.“

Adding a dollar amount and time period lets you measure your progress easily. Also, you can break bigger goals into smaller milestones easier. For example, $13,000 divided by X months until your birthday gives you a monthly amount to shoot for, which is incredibly helpful!

A = Attainable

Don’t shoot for the moon. SMART money goals means being real with yourself regarding what you can (and can’t) achieve. If you set unrealistic goals, most of the time you’ll give up too quickly when you realize the task is overwhelming.

A good place to start is by looking at what you’ve been able to accomplish in the past, and go from there. Or to run the actual numbers to see if you’ve got enough spare cash to reach that birthday payoff goal. Review how much you previously saved every month, challenge yourself, and then it’s game on!

R = Relevant

Are you like me…and write a to-do list of items you’ve already completed, just so that you can cross them off? If so, then this point is for you. 

Make sure that your immediate financial goals are moving you toward the true, bigger goal of the “why behind your money.” Paying off consumer debt is a relevant goal for most people. It enables you to put your money towards things you truly value, versus just paying interest to the bank!

T = Timely

Smaller goals that you can reach on a shorter timeline are crucial to success. The bigger the goal, the longer it will take. So, aim for bite-sized goals that will create momentum and keep you on track.

This is extremely important for folks with very long timelines.

For example, it can take YEARS to save up for a down payment on a house. If your goal is to save $50,000 over four years, you could break this up into more digestible/targeted goals of saving roughly $1,050 per month. When you view it through that lens it seems more achievable, making you more likely to actually achieve that goal. 

E = Evaluate

As you progress, keep evaluating the overall goal along the way. Your specific goals (and your why behind them) may change over time. Different stages of life bring different priorities, so it’s important to modify goals accordingly.

R = Re-evaluate

Try to revisit all your money goals on an annual or even monthly basis – depending on what that goal is. “Are we still saving for a trip to Europe? Or now that we’re expecting a baby do we want that cash to go toward a down payment for a home?”

It might be a good idea to set recurring meetings with yourself (or with your spouse) on the calendar. You could include a goal review as part of your financial spring cleaning, or when you make your end of year financial checklist!

Bottom Line

Remember that sometimes in life we have to give up something to get something. You might encounter that when developing your goals. When I initially went through this exercise years ago I realized that I could actually afford to pay for my family’s vacations in cash if I made sacrifices elsewhere. So, we downsized to one car and kept a 10+ year-old (paid off) car, which saved us tons of money. As a result, last year I took my family on a week-long trip to Disney World for the first time and paid for everything with the money I’d saved – in cash!

As you work through your SMART money goals, give yourself a break when/if you fail. Don’t be afraid to set another goal straight away. Life happens to us all and unexpected bills can derail your aggressive savings goals. That’s OK! You don’t have to throw in the towel altogether. Evaluate, then reevaluate, and stay committed to the larger financial goals you have in play.

Next Steps/Action Plan:

If you’ve never done anything like this before, fear not. We encourage you to carve out some time to figure out what the why is behind your money. There’s no better time than now! 

Seriously, grab a pen and piece of paper, switch your phone to airplane mode, and take 15 minutes to think through what you want your life to look like. 

• If you’re in your 20s, what do you want to spend your time on when you’re 30? 
• If you’re in your 30s, what do you want to be spending money on by the time you’re 40? 
• Think through what you want your typical mornings to look like, what you want your vacations to look like, etc. 

DIVE DEEPER – Download this Money Mission Statement Guide and ponder some of the questions. It’ll give you some great food for thought for developing your SMARTER money goals.

You can do this! And we can’t wait to hear all your success stories and frugal hacks you’ve crushed by using this method.

Beer tasting notes:

While talking about SMART money goals we enjoyed an Alpha Abstraction IPA Vol 13 by Wild Leap! And as we’ve ramped up the podcast with an additional Friday episode every week, we could really use your help to spread the word about How to Money! Hit the share button, subscribe if you’re not already a regular, and give us a quick review in Apple Podcasts or wherever you get your podcasts. Help us to spread the word to get more people doing smart things with their money in these difficult times!

Best friends out!