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EVERYTHING YOU NEED TO KNOW ABOUT SETTING SMART GOALS FOR YOUR PERSONAL FINANCE

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EVERYTHING YOU NEED TO KNOW ABOUT SETTING SMART GOALS FOR YOUR PERSONAL FINANCE

Over the last few years, I have become increasingly interested in finding better ways to manage and stay on track with my personal and family finances. One method I have found to really work is to set SMART goals. 

SMART goal setting goes beyond simply setting goals and hoping to meet them. Instead, setting SMART goals helps me set goals and plan how I will achieve them. 

Please keep reading to understand how SMART goals work and differ from simply setting undefined goals. 

This will help you to become confident in setting your own SMART goals for your money

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How to set SMART goals for personal finance

WHAT ARE SMART GOALS?

SMART goals are a goal-setting method for achieving objectives. This method of goal setting is designed to help create achievable goals tailored to individual needs and capabilities.

The SMART goals method was created by George T. Doran in the early 80s as a way to provide a clear roadmap for achieving goals of any kind.

So what does the acronym SMART actually stand for? 

SPECIFIC

Set specific goals that are clear and concise so that you know what you want to accomplish exactly.

Instead of saying, ‘I want to save more money’, be specific about the amount you want to save within a particular timeframe.

For example, ‘I want to save £3,000 by the end of the year. 

This way, you have a clear target to work towards and can measure your progress.

MEASURABLE

Set measurable goals. This will enable you to track your progress and stay motivated until you achieve your goal. 

For example, set a timeline with milestones if your goal is to pay off debt. You can then pay off a certain amount each month or reach a certain balance by a certain date.

ACHIEVABLE 

Set goals that are achievable within a given timeframe. 

If you set unrealistic goals, you may become discouraged when they are unmet and give up on them altogether.

REALISTIC

Set realistic goals that are workable within your current circumstances.

It will only be possible to cut back your family spending by 50% if you can still afford grocery shopping

TIME-BASED

Set goals within a defined timeframe.

Setting a deadline or timeline for achieving a goal enables you to review how well you are doing and what you need to do to stay on track. 

How often you review your SMART goals depends on the type of goal and how quickly you want to achieve it.

For short-term goals, such as paying off a debt or saving for a vacation, it’s best to review them monthly or quarterly.

For long-term goals, such as retirement savings or investing in stocks and mutual funds, reviewing them at least once a year is best.

Related: 40 Simple money hacks that could save you thousands

TIPS FOR SETTING EFFECTIVE SMART GOALS

1. SMART GOALS HELP YOU ACHIEVE RESULTS

SMART goals help you make sure you are realistic about your goals.

Setting yourself hard to achieve goals is one of the best ways to ensure you fail to meet them. However, it is far better to set achievable goals that you can easily achieve as long as you stay on track.

Once you have become adept at setting SMART goals, you could always look at setting harder-to-achieve goals. 

The best way to ensure you set achievable goals is to sanity-check them against your current circumstances and the current state of your finances. 

2. KEEP YOUR GOALS RELEVANT TO YOU

Your SMART goals should always be about something other than keeping up with the Joneses (or the Kardashians). Your goals should be 100% relevant to you and your family. 

Keeping the goals relevant will help you stay on track to achieving them. 

3. SET REALISTIC TIMEFRAMES

Always be realistic with deadlines and put a plan in place to review where you are at with your goals regularly.

I usually set a monthly calendar reminder to go into my financial tracker and see where I am at with all my goals. 

Let’s dive into a couple of the benefits of setting SMART goals to clearly understand how they work and why they are so useful. 

THE BENEFITS I’VE EXPERIENCED FROM SETTING SMART GOALS 

There are two main benefits of SMART goals. 

1. INCREASED MOTIVATION

I’ve found that setting SMART goals has helped keep me motivated, even when the going has been tougher than expected.

The goals give me a sense of purpose and help keep me focused on what I need to achieve.

It’s exciting to check in regularly to see how things are progressing. If the progress isn’t as planned, I can shift things around to get back on track. This is much better than letting things slide to the point where I give up. 

2. IMPROVED TIME MANAGEMENT

I really like having a timeline to work to. It helps 

Improved Time Management: SMART goals provide a clear timeline. I break this timeline down into smaller increments that I can measure my progress against.

This is a satisfying way of working towards achieving a goal, which feeds back into keeping motivated.  

Now that you have a good overview of SMART goals let’s move on to some examples. These examples will help you get started with deciding on your own goals.

SMART GOAL EXAMPLES

Use these examples of SMART goals for personal finances to develop some goals for personal or family finances. 

1. Create a family budget and stick to it for one month

This is a great foundational SMART goal if you have never set up a family budget. 

Start by listing your income sources and all your family expenses. Then track those expenses for a month to see where you could make cutbacks and savings. 

Review your budget every week for the first month. Then set a reminder to review it monthly once you’ve adjusted it to make savings or allow you to save or invest money

Related: The beginners guide to creating a family budget

2. Save £200 per month for an emergency fund by the end of the year.

Creating a financial goal to save £200 per month for an emergency fund by the end of the year is a great way to ensure you are prepared for unexpected expenses. 

You can then look at your budget to see how you can make savings; you can look at whether there is anything you no longer need that you can sell or look at having a period of frugality to build your fund.

3. Pay off all credit card debt within six months.

Ensure this is a SMART goal by creating a budget to track your income and spending. Then, aim to make extra payments whenever possible and avoid taking on additional credit card debt. 

A smart goal for personal finance is to pay off all credit card debt within six months. This goal is achievable by creating a budget and tracking spending, making extra payments when possible, and avoiding taking on additional debt.

4. Increase your net worth by 10% within one year

Set the percentage of this net worth goal by creating a budget to track your income and spending. Then, work out how much you can afford to save every month, how to pay off any outstanding debt, and plan to learn how to invest your money wisely. 

5. Increase by 10% the amount of income you save for your retirement each month

To set this goal, consider the age at which you would like to retire. You will then need to consider how much money you want to have in your retirement fund by this point.

You can then look at how much money you can realistically set aside each month and how best to invest or save it. 

6. Cut your monthly expenses by 10% within three months.

To achieve this goal, you will need to use your budget to track your spending and decide what to cut back on or stop spending altogether. 

The best way to do this is to track one month’s spending and see what you can realistically cut back on. 

7. Increase your credit score by 50 points within six months

Setting a goal to increase your credit score by 50 points within six months is an achievable and smart goal.

You will need to improve your payment history, reduce your credit utilisation ratio, and dispute any errors on your credit report to reach this goal. 

8. Pay off your student loans within five years.

You must calculate the total amount owed on all your student debt to achieve this goal. This will need to include the principal and the interest. 

You will then need to divide this figure out over five years to give yourself a monthly amount you need to pay.

Once you have this, you can use your main budget to work out where you can make savings or how you could potentially invest money to enable you to meet the monthly payment. 

HOW MANY SMART GOALS SHOULD YOU HAVE? 

The number of SMART goals you should have depends on your financial situation and goals.

Start with three SMART goals that each focus on different areas of your finances.

For example, one goal for saving, one for investing and one for budgeting and debt repayment.

HOW OFTEN SHOULD YOU REVIEW SMART GOALS FOR PERSONAL FINANCE?

It is really important to review your SMART goals regularly. This will help you stay focused and enable you to make any necessary tweaks along the way. 

For short-term goals, such as paying off a debt or saving for a vacation, it’s best to review them monthly or quarterly.

For long-term goals, such as retirement savings or investing in stocks and mutual funds, reviewing them at least once a year is best.

NOW IT IS TIME FOR YOU TO SET YOURSELF SOME SMART GOALS

In conclusion, setting SMART goals for personal or family finance is a great way to stay on track with your financial goals.

It is important to set realistic and achievable goals that you can review regularly in order to ensure that you are making progress towards them.

So why not get started by setting yourself three SMART goals?