Financial Goal Setting

Financial Goal Setting

An important factor in achieving financial success is good financial goal setting that you can work towards. Like traveling, you can get to where you want quicker if you know where you are going instead of wandering about aimlessly.

Simple steps for SMART Financial Goal Setting

Specific – State exactly what you want to achieve, why it is important, and how you are going to do it. An example of a goal that is too general: “I want to decrease my debt”. A specific goal would say: “I want to eliminate my credit card debt by negotiating a pay plan with the creditors and applying the money from my second job toward it.”

Measurable – Assign a specific value to your goal, and establish clear criteria for measuring your progress. It must be evident when you have achieved it and by how much. Too general: “I will pay off most of my debt as soon as possible”. Measurable: “I will pay off $1,000 of my credit card debt in the next 4 months.”

Attainable – Make your goals reasonable to achieve using the skills and resources that you have available. A good goal will require you to stretch slightly, but you need to feel that you can do it, or you won’t commit to it. Unreasonable: “I will be a millionaire in 2 years”. Attainable: “I will save $10,000 in a year saving $25 a day."

Realistic – Set goals that are doable and you can reasonably accomplish. Don’t ignore your limitations, choosing goals too difficult to attain sets you up for failure. Don’t set the bar too low; make sure they require some effort, but within reach. To be realistic, you need to have the skills and the time to gather the necessary resources. Unrealistic: “By managing my finances well, next year I’ll be debt free, and have saved enough to cover my kids’ college.” Realistic: “By managing my money better in three years I’ll be debt free and have an emergency fund of $7,500, which is three times my monthly expenses.”

Timely – Set a timeframe. A time limit will urge you to start saving now and be consistent. Time must be measurable, attainable and realistic.

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