Looking at improving your financial wellbeing? Then setting goals is an essential step. But not all goals are created equal. What you need is for your goals to be SMART: Specific, Measurable, Achievable, Relevant, and Time-bound.
Here’s how setting SMART goals can boost your financial health.
Do you have a clear target in mind? Setting specific goals means you know exactly what you’re working towards, so you can focus your efforts and avoid distractions. For example, many people would like to ‘save more money’. But as a goal, this is a bit too vague and lacks direction, making it hard to stay motivated.
How much would you like to save and why? To be more specific, you may say: ‘I’d like to save $10,000 for a house deposit’. Once you know your target, you can create a plan of action and start measuring your progress along the way.
How can you keep track of your progress if your goals aren’t measurable? Let’s say you’d like to pay off debt – or to be more specific, ‘repay a $4,000 personal loan’. Now, you need to make sure that your goal is measurable, by defining the criteria that you will use to check your progress.
You may start by identifying how much you still owe. Then, you’ll create a plan to pay off that debt over a set period of time, monitoring your debt balance over time. By regularly reviewing how things are going, you can stay motivated and make adjustments along the way.
While it’s good to aim for the stars, if your goals are unrealistic, you may quickly lose steam. On the other hand, if your goals are too easy, you might not feel challenged or motivated to work towards them. So, it’s important to strike a balance between ambition and achievability.
Consider your financial situation, and break down your goals into smaller goals if necessary. For example, if you’re looking at saving $20,000 in the next six months, that might be difficult to achieve, depending on your income and other costs. But you can adjust your goal to something more achievable, like saving $5,000 in the next six months, and $20,000 in two years.
Are your goals relevant to your overall financial wellbeing, and aligned with your values and priorities? If your goals are not relevant to you, it can be difficult to find the motivation to stay on track.
Understanding what financial wellbeing means to you is a great to start. For example, if your top priority is to be debt-free, you may set a goal to pay off all of your credit card debt within the next year. If your priority is to save for retirement, you may set a goal to increase your contributions, and so on. It’s all about your big financial picture.
SMART goals are also time-bound, which means you need to set specific deadlines or timeframes for achieving them. Procrastination is always around the corner, but setting a deadline can give you a sense of urgency and help you stay focused on what you need to do.
Let’s turn back to our initial example: rather than saying ‘I’d like to save more money’, you can say ‘I’d like to save $10,000 for a house deposit within the next 12 months.’ And why not, you may also break down your goal into smaller, actionable steps, each with its own timeframe.
SMART goal-setting can be a powerful tool for achieving your financial goals, or any other goals you may have. By making sure your objectives are specific, measurable, achievable, relevant and time-bound, you can target your efforts, stay accountable, and make progress towards the things that matter most to you.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion, and seek independent guidance.