Setting clear and achievable financial goals is the cornerstone of achieving stability and long-term success.
Goals help focus the mind and give you something to aim for. They are also a powerful psychological motivator, which is why they are used so often in life.
With money tight and bills rising all the time, goal setting is even more important now than ever.
If setting financial goals sounds like something you want to do, here’s how.
Embrace the SMART Approach
To ensure your financial goals are both realistic and attainable, I recommend trying the SMART framework.
It’s used across the world to set goals. Everything from personal goals, work objectives and so on.
You can use the same approach for your personal financial goals too.
SMART is:
- Specific: Clearly define your goals, leaving no room for ambiguity. Instead of simply stating “save more money,” specify an exact amount or target.
For example, ‘save £2,000 to cover three months’ rent and bills’ or ‘save £150 to cover Christmas so I don’t use my credit card.’
- Measurable: Quantify your goal to track progress and assess success.
For instance, instead of “reduce debt,” set a specific target like “reduce credit card debt by 20% by the end of the year or ‘pay off the £230 I have outstanding on my card.”
- Achievable: Set realistic goals that align with your current financial situation and resources. Overly ambitious targets can lead to discouragement and derail your progress.
- Relevant: Ensure goals align with your situation and your overall financial priorities. Irrelevant goals can distract from achieving your primary objectives and we don’t want that.
- Time-bound: Establish a deadline for each goal to create a sense of urgency and motivate you. A deadline provides a clear target and helps you stay on track.
Don’t be too rigid with deadlines though. Stick to them as much as you can but remain flexible enough to adapt if things change or emergencies happen.
Actionable steps to set clear financial goals
- Assess your current financial situation: Begin by understanding your income, expenses, and debt obligations. You need this to provide a realistic baseline for setting achievable goals.
- Identify your financial priorities: Reflect on your short-term and long-term financial aspirations. What do you want to achieve financially? Prioritize goals that align with your overall values and life goals.
- Break down large goals into smaller steps: Large goals can seem daunting. Break them down into smaller, manageable steps to create a clear roadmap for progress.
- Set realistic timelines: Assign realistic deadlines to each step of your financial plan. Be honest with yourself and make sure the timeline is achievable while providing a little challenge.
- Track your progress regularly: Regularly monitor progress towards achieving your goals. This will help you identify areas for improvement and stay motivated. Every time you see progress, it will help spur you on to save more.
- Seek guidance when needed: Don’t hesitate to seek professional financial advice if you need assistance in setting and achieving your goals. There’s plenty of help out there, from IFAs to debt charities.
Financial goals should not be static: As your financial situation and circumstances evolve, it’s important to revisit and adjust your goals accordingly.
Things change, life gets in the way and emergencies happen.
While having a clear roadmap is important, you need some flexibility to adapt to anything that may happen during the process.
It’s a tough balance to strike, but one you should do if you can.
Stick as closely to your goals as possible to maintain momentum, but also be prepared for unexpected expenses, bills or situations that life just loves to throw our way.
SMART may seem corporate or not relevant to you at home. But it’s just a framework and can be applied to many areas of life, including personal finance.
By embracing the SMART framework, taking actionable steps, and continuously refining your financial plan, you can navigate the path to financial success with clarity and confidence.
Hopefully, it’s enough to set you on the path to success and give you everything you need to improve whatever situation you find yourself in.
