How To Set S.M.A.R.T. financial goals: A Guide With Examples

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Apr 15, 2024
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    Set your financial goals smartly

    Financial goals are targets you set for your finances to gain financial freedom over time. These goals range from regular monetary savings to business investments and spending income limits. Your societal status and age determine the type of financial goals you have.

    A financial goal for a school-going kid may include saving money for a new pair of branded shoes, while an adult professional might plan to buy the latest model car.

    However, simply saving may not be enough to reach your objectives. Sure, personal financial management can feel challenging. But setting SMART financial goals can help you plan, maintain, and achieve your ambitions.

    So, what is a SMART financial goal? Read the article to learn what it means and how establishing SMART objectives for personal finance can make your journey toward financial freedom easier.

    What Are S.M.A.R.T Financial Goals?

    The SMART method—an acronym for Specific, Measurable, Achievable, Realistic, Time-Bound—is one of the most efficient ways to achieve goals. It provides a framework to structure financial objectives and an easy path to success. Here are the criteria for establishing a SMART goal for personal finance.

    1. Specific
    Identify and specify your financial goals. The more precise and well-defined your objective is, the earlier it will be to plan a route to attain it. Further, remember to categorise your goals into three categories:

    • Short-Term Goals: These goals can be achieved within a year, such as purchasing a computer or saving for vacation.
    • Medium-Term Goals: These objectives span five years, like paying off student loans.
    • Long-Term Goals: Long-term objectives extend over five years and involve significant achievements like building a retirement fund.

    2. Measurable
    Once you have identified your specific financial goal, it is time to quantify it. Bring every aspect of your financial plan- the targets, time span, preferences, and every resource- to the weighing scale.

    Keep in mind that setting an unmeasurable financial goal means there are fewer chances of achieving it. Hence, establish realistic goals and determine ways to track your progress.

    3. Achievable
    Always set achievable financial goals that are within the limits of your savings. Living below your means is the easiest way to accumulate more savings. If you spend more than your revenue, you create debt. 

    Always remember to lay out a financial plan focusing on achievable financial goals in the short, mid, and long term. Identify what steps you must take to bring your goals within reach.

    4. Realistic
    It is wise to save for something meaningful to improve your financial well-being. The world of money is filled with economic uncertainty and technological disruption. Establishing a challenging goal can help you push yourself, but ensure it is within reach.

    From budgeting to creating revenue sources to monitoring your financial performance, always keep a realistic mindset. If something goes wrong, reevaluate your financial plan and get back on track.

    5. Time-Bound
    Prioritise your goals and set a timeline. If your financial goal lacks a timeline, it is more or less a wish, not a goal. Therefore, concentrate all your savings and additional resources on pursuing your financial goal.

    Focus primarily on easy steps or targets in the process. Accomplishing easier targets boosts your confidence and motivates you to achieve more difficult benchmarks.

    Examples Of S.M.A.R.T Financial Goals

    Financial goals can be long-term and short-term. Here are some primary SMART financial goal examples:

    1. Paying Off Debt

    • Specific - Define your goal clearly, like paying off credit card debt.
    • Measurable - The credit card debt is INR 18,000.
    • Achievable - Paying a specific amount per month can help clear the debt.
    • Realistic - Deduct your taxes and daily expenses from your monthly income to decide whether you can complete your objective.
    • Time-Bound - Pay off your debt in the next six months.

    2. Saving For Home Down Payment

    • Specific - Save INR 50,000 for a down payment on a home within two years.
    • Measurable - Set aside about INR 2,000 monthly and track progress.
    • Achievable - Consider your expenses and current income.
    • Realistic - Owning a house is a long-term financial plan and can be done by proper money management.
    • Time-Bound - Achieve the goal within three years to align with housing market conditions and personal timeline.

    3. Saving For Retirement

    • Specific - Make the goal more specific, for instance, by contributing monthly to fund retirement.
    • Measurable - The retirement fund must be approximately INR 1,00,000.
    • Achievable - Reducing deductions from your salary, including taxes and expenses, and setting aside 10% of your income for the fund monthly is an actionable step.
    • Realistic—Assess your financial situation and ask yourself if you can work with a 10% smaller paycheck. If the answer is no, consider lowering your contribution amount.
    • Time-Bound - Saving for retirement is a long-term goal. It is ideal to start at present to prepare yourself for the future.

    Tips To Achieve Your Financial Goals

    Setting financial goals is an essential part of personal finance planning. It is the first step towards realising your vision for your financial future. Apart from the SMART method, there are more ways to achieve your financial goals. Here are some practical personal finance strategies you can consider.

    1. A Financial Goal Chart
    Did you know creating a goal chart or writing down your goals can increase your chances of achieving them? It is one of the old-fashioned visual stimulus methods that help you commit to the task.

    So, identify and pen your short—and long-term financial goals. Save them on your phone, use them as wallpaper, or stick a chart to your wall. Keeping your set goals where they are easily visible will motivate you to gain financial freedom.

    2. Financial Applications
    The digital world offers many mobile applications to help you achieve your financial goals. These free and paid applications constantly remind you to practice personal financial management strategies.

    Most of these financial applications, like NerdWallet and Simplifies, can create a good road map for your financial goal and notify you to take the next step after you achieve every target along the way.

    3. Reward Yourself
    Reward works even in the world of finance. If you can successfully achieve each target, big or small, in your journey towards your financial goals, never hesitate to give yourself a little treat.

    Appreciating your efforts motivates you to achieve larger targets in your future financial journey. Disclosing your goals or ambitions to your family or friends can encourage you to take action.

    4. A Diversified Investment Portfolio
    Saving money is crucial. However, with an aggressive investment portfolio in place, you can grow your wealth. A diversified portfolio can help you mitigate troubled times, market risks, and changing economic conditions. You can build an ideal portfolio with a good mix of low-risk and high-risk investments.


    Taking control of personal finance can help you ensure financial stability and security. While setting SMART financial objectives is crucial to making informed decisions and building a fulfilling future, it is essential to have the right mindset. You can tap into opportunities to earn passive income and grow wealth over time to accomplish your objectives.

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