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Setting SMART Financial Goals

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Setting SMART Financial Goals


Has something beneficial ever happened to you with no effort on your part? Sometimes good things just happen, but usually it takes some planning and effort on your part to make those good things happen.

Setting financial goals is an integral part of financial success. Financial goals help to guide your short- and long-term spending decisions because they force you to identify priorities for your money.

It’s also important to put your financial goals on paper. Statistically, goals that are written down are much more likely to be achieved than goals you just keep in your head.

Use the SMART acronym to set your financial goals:

smart financial goals



State exactly what is to be done with the money involved. A specific goal has a clearly defined end result. For example, to say “I’ll reduce my debt” lacks specificity. Saying “I’ll reduce my credit card debt” is more specific.



State the exact dollar amount. A measurable goal is one for which you can easily determine when the goal has been met and whether you’re making progress toward its completion. In our example, simply saying “I’ll reduce my credit card debt” is specific, but not measurable. However, the statement “I’ll reduce my credit card debt by $2,000” is both.\



Create a step-by-step plan showing exactly how the goal can be reached. An attainable goal is one you know is possible to achieve. Our goal of “I’ll reduce my credit card debt by $2,000” is not attainable if you don’t know how you’re going to make that happen. But saying “I’ll reduce my credit card debt by $2,000 by paying an extra $340 each month” is attainable because you’ve identified exactly what you’ll do to get there.



Think through the trade-offs and opportunity costs to analyze if you’re goal can be achieved. Are you willing to give up what’s necessary to achieve your goal? In our example, your goal of paying an extra $340 a month toward your credit card debt is realistic only if you’re willing to sacrifice other things to make it happen. Maybe you’ll have to give up eating out or weekend trips for a while. Or maybe you’ll give up some free time by getting a delivery job in the evenings to earn extra money. Ultimately, a specific, measurable and attainable goal will fail if you’re not willing to stick with the plan to achieve it. Make sure your goal is something you can commit to.


Time Bound

State exactly when the goal will be reached. It’s important to put a time frame on your goal. For our example, the statement “I’ll reduce my credit card debt by $2,000 in six months by paying an extra $340 each month” makes it a complete SMART goal.

When setting financial goals, it’s important to remember they’re not set in stone. Events might happen that throw off your plan. It’s good to frequently evaluate your goals to see if they still make sense. If you’re struggling to keep up, you may have set a goal that’s not realistic. Optimism sometimes causes us to create unrealistic goals. It may require more time or money than you originally thought it would. Don’t give up on your goal; it’s okay to adjust along the way.

Finally, improve your chances of successfully achieving your goal by setting a reward and making it public. This will help hold you accountable and provide extra motivation and support. People will want to see you succeed and celebrate with you when you do.