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  • Mark Fonville, CFP®

SMART Guidelines for Personal Financial Goals

Smart Guidelines for Personal Financial Goals

Goals are the foundation of your financial plan.

They help chart the course for your investments, daily habits, and your money outlook.

But sometimes, your goals can start to feel too comfortable and you lose excitement and momentum toward reaching them.

Download Now: Master List of Personal Financial Goals [New for 2021]

We want to help you change that.

Your financial goals shouldn't remain idle—lying dormant on a piece of paper or planning software. Instead, your goal-setting journey should be active and purposefully drive you forward while also informing your daily choices.

The trick? Adhere to SMART guidelines for personal financial goals.

What are SMART goals and how will this strategy transform the way you approach your money?

Here's everything you need to know about SMART guidelines for personal financial goals.

Breaking Down The S.M.A.R.T Acronym

Daydreaming about your goals is just phase one.

You can talk the talk all day long but with your goals, it’s also important to usher in phase two: walk the walk.

SMART goals can help you do that. They bring intention, purpose, and meaning to each goal you set. Let's take a look at what each of these letters means.

S: specific

  • Ditch the general, here is where you can start to narrow down your goals and give them a purpose. Instead of saying your goal is to establish an emergency fund, you could say that your goal is to save $10,000 in a high-yield savings account. That's a specific goal.

M: measurable

  • SMART financial goals must be measurable, meaning you have to be able to track your progress. If saving $10,000 is one of your short-term goals, you need a strategy to ensure you're staying on track. Perhaps that's saving about $850 a month for a year. This gives you a benchmark to help with your monthly budgeting.

A: achievable

  • Your financial goals should be attainable. If you start saving for a downpayment on your retirement house today, odds are you won't reach that 20% mark within a year or two. The average home price in Richmond, VA is about $275,000 according to Zillow. You'd need about $55,000 for a 20% downpayment. If you're starting from scratch, make your house-hunting timeline more reasonable.

R: relevant

  • Personal finance is all about aligning your money with your life, and your goals are a significant part of that equation. Your savings goals should be relevant to both your short-term and long-term vision for your life. Perhaps in the short term, you want to get out of credit card debt. Offloading that bad debt will help boost your credit score and put you in a better position for when you want to buy your retirement house. Being debt-free is a relevant goal that puts you in a strong financial position.

T: time-bound

  • Time is an important element in financial planning. Your goals should have a timeline behind them as it can help you make progress and maintain motivation. Let's say you have a 10-year time frame until retirement. You and your advisor can make a plan to prepare and maximize your money during that time.

Here is an example of a SMART goal for a young physician couple who wants to retire early.

Specific: Retire by 50.

Measurable: Create an active debt repayment plan and reallocate current spending to max out retirement opportunities from the start. Build a withdrawal plan that supports early retirement by avoiding early withdrawal penalties and investing tax-efficiently.

Achievable: This is a high-earning field (physician) that allows them to save aggressively early on and live below their means to achieve this goal.

Relevant: Retiring early is important for their future lifestyle as they want to travel and focus on creating experiences.

Time-bound: The couple has 20 years to amass their desired retirement number.

You can apply this formula to any short or long-term financial goal you have: retirement, paying for your kid’s college, creating a career you love, leaving a legacy, etc. Knowing your goals will help you make more informed and intentional financial decisions to help you reach your desired outcome.