How to Set SMART Financial Goals

Quick Answer

You can set SMART financial goals by building your goals around the five elements of a SMART goal:

  1. Create a specific financial goal.
  2. Find ways to measure your progress.
  3. Make your goal achievable.
  4. Scale your goal to be realistic.
  5. Set and stick to a timeline.
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Setting financial goals is an essential first step toward realizing your vision for your future financial situation. But it's easy to make the mistake of setting overly general goals such as getting out of debt or saving enough for retirement. Goals like this can be easier to accomplish if you break them down using the SMART goal strategy.

The SMART acronym stands for Specific, Measurable, Achievable, Realistic and Timely. Read this guide to learn how to set your own SMART financial goals and raise your odds of success.

1. Set Specific Goals

Make your financial goals specific so you have a clear understanding of what you want to accomplish. The more well-defined your goal is, the easier it will be to plan a route to get there.

For example, you might start with the general notion that you want to save more money or that you want to start investing for retirement. These are good starting points, but it's difficult to meet goals without a clear target. How much do you want to save from each paycheck? How much money do you want to invest for retirement?

Make these goals more specific by defining them further: "I want to automatically transfer a portion of each paycheck into a high-yield savings account" or "I want to save for retirement by automatically investing a portion of each paycheck into my 401(k)."

Specific financial goals will help you understand precisely what you want to accomplish, how you'll know you're on track, how you'll do it and when you plan to meet your goal. In short, specific financial goals are clearer, more motivating and easier to achieve.

2. Create Ways to Measure Your Progress

Make your financial goal measurable by finding ways to quantify your progress.

In the case of saving, such as for an emergency fund, you can make your goal measurable by defining how much and how often you'll save: "I'll automatically transfer $50 from each biweekly paycheck into a high-yield savings account." That way, you'll know what you need to do to achieve your goal and you'll know whether or not you're on track.

If you have a retirement goal of putting some of your income into a Roth IRA, make this goal measurable by defining your contribution amount: "I'll defer 15% of each paycheck into a Roth IRA."

If you're aiming to pay off all your credit card debt, you can make your goal measurable by tallying up your balances to have a clear picture of how much debt you have to pay off, and then deciding how much you'll funnel toward the debt each pay period.

3. Make Sure Your Goals Are Achievable

To make your financial goal achievable, identify what particular steps you'll need to take to bring your goal within reach.

For example, in the case of investing for retirement, one of the best ways to make your investing goal achievable is to set up automatic contributions. When you automatically pay yourself first by funneling money into your retirement account, you'll avoid the temptation to spend the money elsewhere.

On top of this, you can make your investing goal achievable by ensuring you can live on what's left of your pay after your contributions are taken out. Start by tracking your spending and creating a budget.

You can also make your financial goals more achievable by cutting discretionary spending and looking for ways to increase your income.

4. Keep Goals Realistic

Create financial goals that are realistic for you. Setting a challenging financial goal can help you push yourself, but be sure to set goals that are within reach.

For example, if you're planning to get married in two years, setting a savings goal for a $100,000 luxury wedding would be very difficult, if not downright impossible, for an average earner to accomplish.

Instead, plan your goal around what you can afford. For example, you could shrink your budget to a more attainable goal of $28,000, which was the average cost of a wedding ceremony and reception in 2021. Alternatively, you could push your wedding out a few years to make saving for a larger wedding more realistic.

5. Include a Timeline to Complete Your Goal

Most goals need deadlines. That's why you should implement a timeline when you set financial goals.

For example, if your goal is to save $1 million by retirement, you can break that goal up into smaller goals with deadlines. For example, you might aim to save $7,000 for retirement by the end of this year. Alternatively, you could break up your retirement goal by focusing on the shorter-term goal of saving three times your salary by age 40.

When it comes to paying down high-interest debt, assigning yourself deadlines for how much of your balance you'll have paid down can help you stay on track and create a realistic plan.

If you're shouldering $20,000 in credit card debt, for instance, you might want to make paying it down ASAP a top priority. To make a SMART debt payoff plan, you could assign a deadline for when you'll be out of debt, such as within two or three years. With a smaller balance, you might aim to be debt free within one year.

If you have a high credit score, consider combining SMART goal-setting with savvy credit product strategies to make paying down debt more efficient. Transferring your balance to a card with a lengthy 0% introductory APR period could save you a lot of money on interest, and it provides you with a deadline. If your introductory APR period ends in 18 months, you'll need to commit to making monthly payments to pay down your debt in full before the introductory period ends. You could accomplish the same thing with a personal loan, with a fixed term and monthly installments acting as built-in timelines.

How to Create Your Own SMART Financial Goal

Ready to set your own SMART financial goals? Here's an example of putting SMART goal elements together to create a clear financial plan and set yourself up for success, as well as a template you can use to set your own SMART goal now.

When you're creating your SMART goals, review the following questions and answers to help you get and stay on your financial path.

SMART Financial Goal Template
SMART Element Core Question Core Answer
S: Specific What exactly do I want to achieve? Why do I want it? I want to…

My goal is important because…

M: Measurable How will I know that I'm on track with my financial goal? I'll know I'm making progress if…
A: Achievable What tangible steps will bring my goal within reach? What habits will I change? I can achieve this goal by…
R: Realistic Is this goal within reach? Are my expectations reasonable? My goal is realistic because…
T: Timeline What's the end date for my goal? What milestones will I set? The timeline for my goal is…

Here's an example of what your SMART savings goals might look like:

Example: SMART Retirement Investment Goal
S: Specific I'll save for retirement by deferring 15% of each paycheck to my 401(k). That way, I'll get the most of my employer's match of 6% of my income.
M: Measurable I will check my 401(k) statements to see my progress toward my goal.
A: Achievable I can achieve this goal by using automatic contributions. By paying myself first, I won't be tempted to dip into funds I've committed to investing for retirement.
R: Realistic My goal is realistic because I've built my budget around what's left of my pay after making my pretax contributions. If 15% becomes unmanageable, I'll lower it while still contributing at least enough to make the most of my employer's match.
T: Timeline The timeline for my goal is both short term and long term. I aim to save at least one times my current income by age 30, three times by age 40, six times by age 50, eight times by age 60 and 10 times by age 67. My short-term, time-based goal is to save $7,500 per year.

Get SMART About Credit Monitoring

While working to complete your SMART financial goals, keep tabs on your credit by tracking your score and reviewing suggested areas of improvement.

Raising your score now can help you qualify for loans and credit cards with good terms when you need them, such as when you're ready to buy a car or house. You can check your FICO® Score , review your credit report and view tips for improving your score for free through Experian.