How to Make SMART Money Goals

Goal-setting is a great motivational tool to reach the achievements you set out for yourself. It’s often talked about in the personal growth arena in the form of things like bucket lists or 30-by-30s, and you’ll often hear about goal-setting in the professional sphere by way of SMART goals. So what’s a good way to approach your money goals?

I’ve found that the SMART framework is a great one to apply to your financial goals. It gives you a way to take your great big ideal (like “pay off all my student loans” or “save up enough to go to Europe”) and build yourself a guide to achieving it.

Ready to start reaching your own money goals? Let’s dive in and see how SMART goals could work for you!

The SMART Goals Framework

SMART is an acronym, and each letter in the word stands for a “characteristic” of the goals you should set for yourself. It’s not so much about what your goal sets out to accomplish, and more about how to set yourself up to actually achieve what you’re setting out to do.

Here’s a breakdown of SMART goals. They are:

• Specific
• Measureable
• Action-oriented
• Realistic
• Time-sensitive

The SMART framework gives you a way to set concrete goals that are reachable. By building a plan to power through to your goal using the SMART setup, you’ll have a clear idea not only of how long it should take you to reach your goals, but exactly what you need to do to get there.

Let’s take each of these SMART elements and see how they apply to your financial goals.

First, Pick a Goal

When you think about setting financial goals, your eyes might glaze over because numbers and spreadsheets and calculations and all that stuff can get overwhelming, if not overwhelmingly boring. But when you commit to making a better future for yourself, you’ll need to commit to doing the set-up work that’s necessary. And that’s where goal-setting comes into play.

“Figure out my finances” is where a lot of people start, but that’s not really a goal at all and more like an observation of something you feel like you “really should do.” Take that big idea and figure out what the actual piece is that you need to address. It could be something small, like putting together the money for a deposit on a new apartment or taking a trip to somewhere exotic. It might be saving up for a major expense like a wedding or a car. And for many of us, the big thing is paying off student loans and other debt.

Be Specific

A great money goal is one that’s specific. It’s clearly defined, totally explicit, and easy to understand even for someone who isn’t familiar with your situation.

To make up an example, a SMART goal might be “Clean up my debt.” And while that’s a good place to start, make it more specific than that. Something like “Pay off all my debt” is moving in the right direction, but you could take it even further and include the exact number of dollars you plan to pay off.

Make it Measurable

Want to accomplish something? You have to be able to tell when you’ve actually made it. A SMART goal is one that you can measure at any given point. Money really lends itself to this, because it’s easy to measure the amount of money you’ve saved, paid, spent, or allocated. And by making your goal measurable, you’ll give yourself a definite finish line. That means you’ll be able to tell when you’ve achieved it!

An example of a goal that’s not measurable might be something like “Put money into savings.” Instead, turn that idea into a goal you can tick off when it’s accomplished. If your goal is to build more savings, a measurable version of that goal would be something like “Save up 3 months” worth of living expenses.” If you know what one month of living expenses is, you can figure out what 3 months would be, and then you’ve got a measurable (and specific!) goal to work toward.

Keep it Action-Oriented

A good SMART goal is one that gives you a specific action to take, rather than something fluffy and nebulous. Take your big goal and figure out the (new) action you need to take to achieve that goal.

If your big goal is to pay off your debt, specify exactly how much money you’ll set aside every week/month/paycheck. Same thing if you want to build savings or start investing — stipulate the specific action you’ll take to achieve that goal. How much money will you move, from where to where, and on what timeframe? Be really explicit.

Get Realistic

This might be the trickiest part for some goals. You need to have a solid understanding of exactly how much progress you can make. If you’re making an annual salary of $30,000 and you want to build a $50,000 savings cushion from scratch by the end of the year, you aren’t being realistic. It doesn’t matter if you’re the most ruthless budget-slasher in the history of money managers — that goal simply can’t be done on that salary. (Now if you did something to boost your income, like picking up a second job or starting a side hustle, that’s a different story!)

You also need to take into account your limitations. If you get takeout twice a day, be realistic about the likelihood that you’ll be able to switch to making every meal at home starting tomorrow. You might make slower progress toward your goal by allowing for a realistic goal, but you’ll also be making actual progress instead of trying to force yourself to do something and then rebelling against it and wasting all your efforts.

Take Your Time

The final piece of a SMART goal is the calendar — time. Your goal is specific, measurable, action-oriented, realistic, and has a time limit. Putting a time limit on it gives you a nice parameter to work with, giving all the other pieces a context and keeping everything moving. Having the timeframe makes your goals more specific and measurable, and you can adjust both the timeframe and the actions you take toward the goal to keep everything realistic.

All in all, the SMART framework is a business concept that works great for finances, too. By approaching your money goals through the SMART lens, you’ll set yourself up for success right from the start, and you’ll see regular progress, which makes you feel great. Not a bad way to achieve some financial milestones!