How to Create SMART Financial Goals

How to Create SMART Financial Goals

The start of 2022 is a perfect time to create SMART goals for your financial future. SMART stands for specific, measurable, attainable, realistic, and time-bound. Because you need to be thinking beyond the present and planning for the future, beginning the process today can help you attain your objectives faster.

Learn how to set and achieve SMART financial goals that can impact your life both now and in the future.

Write Down Your Financial Goals

Make a list of your short-, mid-, and long-term financial goals. Putting your goals in writing lets you work with definite numbers, track your progress, and determine whether you attain your objectives. Begin by writing down what you want to do or buy in the future. You can prioritize and lessen your list later. For instance, in the next 12 months, do you want to go on vacation, take a class, or pay off a credit card? In the next 3-5 years, do you want to build an emergency fund, get a degree, or save for a down payment on a house? In 20 years, do you want to have your home paid off, retire, or travel the world? Firming up your plans for later lets you reassess your spending habits and prioritize what you do with your disposable income.

Example: Eliminate Your Credit Card Debt

If you want to bring your credit card balance to zero, you might write, “I will pay off my $2,500 credit card balance within 6 months to avoid paying additional interest. I will accomplish this goal by drinking coffee at home and picking up a seasonal job to put $500 per month toward the bill.” Your goal is:

  • specific: to pay off your $3,000 credit card balance
  • measurable: pay $500 per month for 6 months
  • attainable: taking this action is a reasonable way to reach your objective
  • relevant: the amount of interest you pay will be reduced
  • timebound: achieved within 6 months.

Example: Create an Emergency Fund

If you need to build an emergency fund, you could write, “I will create an emergency fund by saving 6 months of income within the next 12 months. I will have a yard sale of items I do not need and take on temporary jobs to build this fund. Then, I will not have to charge expenses that may increase my debt load.” Your goal is:

  • specific: to build an emergency fund
  • measurable: save 6 months of income within 12 months
  • attainable: you are motivated not to have financial concerns when unexpected expenses arise
  • relevant: you can avoid taking on expenses you cannot cover
  • timebound: achieved in one year.

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