How to Set Financial Goals That You'll Actually Achieve
Most New Year's resolutions fail by February. Why? Because they lack structure, specificity, and a realistic path to achievement. This is especially true for financial goals.
"I want to save more money this year" sounds positive, but it's practically useless as a goal. More than what? How much more? By when? Without these details, you're setting yourself up for disappointment.
Enter SMART goals – the framework that transforms vague financial wishes into achievable outcomes.
What Makes a Goal SMART?
Specific: Define exactly what you want to accomplish.
Vague: "I want to save money."
Specific: "I will save for a down payment on a house."
Measurable: Attach concrete numbers to track progress.
Unmeasurable: "I want to reduce my debt."
Measurable: "I will pay off $12,000 of credit card debt."
Achievable: Be ambitious but realistic given your circumstances.
Unachievable: "I'll double my salary this year" (with no plan or prospects).
Achievable: "I will increase my income by 15% through a combination of salary negotiation and side projects."
Relevant: Ensure the goal aligns with your broader life objectives.
Irrelevant: Saving for a vacation when you have high-interest debt.
Relevant: Building an emergency fund if you currently have zero savings.
Time-bound: Set a deadline to create urgency and enable measurement.
Open-ended: "I'll start investing someday."
Time-bound: "I will open and fund a Roth IRA with $500 by March 31st."
The Psychology Behind Goal Achievement
Research shows that writing down your goals makes you 42% more likely to achieve them. This isn't just about documentation – it's about commitment and clarity. Side note: I actually read a book after I graduated from College called “Write It Down, Make it Happen!” And I didn’t just write down life goals, I wrote down what I wanted in a husband…now if I can only find that list to compare …kidding my husband is amazing.
When we write goals down, we:
Force ourselves to clarify what we want
Motivate ourselves by setting a target
Create a visual reminder we can see and check on again and again (this was SO key for me!)
Engage both sides of our brain in the commitment (the creative and logical)
Financial Goal Categories to Think About
Short-term goals (under 1 year):
Building a $1,000 $5,000 - $10,000 starter emergency fund (Financial “experts” say $1k, I say yeah right that won’t cover gas, groceries or new tires!)
Paying off a specific credit card
Saving for an upcoming vacation (this is a MUST - you need to recharge and what a fun goal!)
Creating and following a budget for 3 consecutive months (oooh that is a dirty word, but again you MUST create and follow a budget especially when you start making lots and lots of money, isn’t that the goal here?!)
Medium-term goals (1-3 years):
Building a full emergency fund (3-6 months 1 to 2 years of expenses) again in this day of layoffs and remote work it can take a very long time to find a new job, heck it took me a year to find a new job TEN years ago!
Saving for a home down payment
Paying off student loans
Saving for a major home renovation
Long-term goals (3+ years):
Retiring with a specific amount (you should really start thinking about retirement as soon as possible because every decision you make impacts THAT future)
Paying off your mortgage (again this is what Financial “experts” say I don’t agree, never try and pay off your mortgage - that’s a different plan I will share (some posts to check out on this topic)
Funding children's education and other “family needs”
Reaching financial independence - MUST
Creating Your Financial Goal Action Plan
Goals without plans are just wishes. For each SMART goal, create a detailed action plan:
Break it down: If your goal is to save $12,000 this year, that's $1,000 per month or $250 per week. Suddenly it seems more manageable.
Identify specific actions: What exactly will you do to achieve this? Will you cut certain expenses? Increase income? Automate savings?
Schedule these actions: Set calendar reminders for regular check-ins with your goals.
Anticipate obstacles: What might prevent you from achieving your goal? Plan for how you'll handle these challenges.
Create accountability: Share your goals with someone you trust, or find a financial accountability partner.
Examples of SMART Financial Goals
Bad: "Save more money." SMART: "Save $6,000 for an emergency fund by December 31st by automatically transferring $500 from each monthly paycheck into a high-yield savings account."
Bad: "Pay off debt." SMART: "Pay off my $4,800 car loan by October 1st by making $600 monthly payments instead of the required $400."
Bad: "Start investing." SMART: "Contribute $6,000 to my Roth IRA by making automatic monthly contributions of $500 starting January 15th."
Your Turn: Create Your SMART Financial Goals
Take 15 minutes right now to write down at least three financial goals for this year using the SMART framework. Remember that each goal should be:
Written down clearly
Meaningful to you personally
Challenging but achievable
Broken down into actionable steps
Download our free SMART Financial Goal Worksheet to get started. Next week, we'll build on these goals by creating a personalized budgeting system that aligns with your financial objectives and personal habits.