Setting SMART Financial Goals for the New Year

The new year is approaching and it's the perfect time for fresh beginnings. It's important to take a moment to reflect on your financial aspirations and set clear goals for the year ahead. It may appear daunting to change your financial strategies, but taking small and intentional steps can lead to significant changes in your personal or professional resolutions. By reviewing your current financial situation, including income, expenses, debts and savings, it'll be easier to identify areas of focus for your goals. The overall process is made easier by using the S.M.A.R.T framework, an acronym that is often used for setting goals and project management. By applying this concept, you can ensure that your goals are well-defined and achievable. Let's break down each aspect of S.M.A.R.T. and create purposeful goals toward financial success.

1. Specific

The first component of S.M.A.R.T. for financial success is specificity ‒ being direct and intentional with what you’d like to achieve. Clearly defining your desired outcomes and being specific with details such as the who and the why eliminates any ambiguity surrounding your end goal. Instead of setting a vague objective like, “Save more money,” you should be more specific such as “Save $5k for our office expenses by optimizing our sales team.” As you create and plan for your goals, think about why it's important and what resources will need to be involved. These are questions that can help break down your goals. By setting specific goals, you’ll have a clear target to work toward for both saving and spending.

2. Measurable

Creating and adding specific goals to your agenda is one thing; having them be quantifiable is another. Measurable goals involve attaching specific metrics or criteria, allowing you to track your progress and determine if you’re on the right path. Pinning a number to your target will also help you visualize a deadline. Here's a measurable goal that has clear intentions, “Pay off $5,000 in credit card debt by the end of the year,” instead of just, “Reduce debt.” Make sure to watch your progression and celebrate when you reach small milestones. It'll eventually become satisfying and increasingly more rewarding as you see yourself reaching your target number. Remember that it's important to visualize a clear picture of how far you've progressed and what still needs to be done in terms of budgeting.

3. Achievable

While it’s important to shoot for the stars, it’s equally important to create goals that are realistic and achievable. Your financial goals should be meaningful and contribute to your overall strategy. Striking the right balance is crucial since an overly ambitious goal can be deterred by insufficient resources and time, while a goal that’s too modest may lack meaningful impact. You should assess your current financial situation and create objectives that are within reach and challenge you. For instance, if your business brings in $60,000 per year, setting a goal to save $55,000 in a year may not be practical. An attainable goal would be to aim to save 20% of your revenue, making adjustments as circumstances evolve over time. Furthermore, reaching certain milestones may require particular experiences, skills or attitude but that’s perfectly normal when it comes to achieving realistic goals. Consider the thought of increasing your bank account balance. It’s a feasible goal that is doable but also inspires motivation which in return may evolve your financial literacy.

4. Relevant

Relevance refers to setting goals that align with your values and priorities. Relevant financial goals will help you understand where you should focus your attention and resources. This ensures that your time and money are directed towards concrete needs. Ask yourself if it is worthy or if it’s the right time to follow through. You can evaluate whether your financial goals complement your other aspirations because there are times where you need to meet your immediate necessities while also supporting your long-term goals. An example that isn’t relevant for your financial endeavors is saving $1,000 to buy the newest smartphone within the next three months. Although the goal is specific, it may not be considered a relevant goal if your long-term goal is to save money for an essential need or to reinvest in your business. Every year presents a different landscape, which makes it important to evaluate your financial focus on an ongoing basis.

5. Time-bound

Every one of your goals should have a set time frame in order to add some sort of structure and motivation. A goal that is time-bound provides a clear target date which has a sense of urgency and can motivate you to make progress. Breaking down your goal within a specific timeline not only makes it easier to track but also lessens the perceived intimidation factor of tackling the challenge as a whole. An example of a time-bound goal would be saving $3,000 for an emergency fund within the next six months by setting aside $500 from each client payment. This goal creates a sense of accountability and encourages you to take consistent action toward the end date.

Author: Gary Wong

Have you used the S.M.A.R.T. framework before? How has it helped?

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