How To Use SMART Goals in Financial Planning, According to Experts
David Gyung / Getty Images/iStockphoto
Commitment to Our Readers
GOBankingRates’ editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services – our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Trusted by
Millions of Readers
Financial experts have all kinds of tricks up their sleeves when it comes to managing finances. They know all the right money hacks and methods to stay on track. And one of their secret weapons for financial planning? SMART Goals.
“I’ve found SMART goals to be extremely helpful in developing financial plans for both individuals and businesses,” said Ben Klesinger, founder and CEO at Reliant Insurance Group and Helping Hand Financial. “Setting Specific, Measurable, Achievable, Relevant and Time-bound goals helps provide clarity and accountability.”
For example, he said a SMART goal for an individual to work toward getting out of high-interest debt might be: “I will pay off $20,000 of my outstanding credit card balances within 18 months by making minimum payments of $1,100 per month.
“This goal is specific in the amount and timeline, measurable in the minimum monthly payment, achievable with discipline, relevant to the broader goal of paying down debt and time-bound with an end date.”
Klesinger believes achieving a series of SMART goals like this leads to progress over time.
Read below how you can use this smart technique in your financial planning.
Start With a Broader Vision, Then Break It Down
The key, according to Klesinger, is to start with your broader vision or objective, then break that down into concrete SMART goals.
“Review and revise these goals regularly based on your progress and any changes in priorities,” he said. “SMART goals, when used properly, are a simple but highly effective tool for achieving financial success.”
SMART in goal-setting stands for Specific, Measurable, Achievable, Relevant and Time Bound. SMART goals are often used for getting healthy, career growth and are also important when working on achieving financial goals.
“You may feel as if you don’t have enough money to begin investing,” Klesinger explained. “Perhaps you started a business and find yourself overwhelmed with the speed at which your business grew and do not know where to start in sorting out the financial side. Maybe you have significant credit card debt that you are having difficulty paying down. Whatever the overwhelming situation you find yourself in, SMART goals can help simplify things and help you identify your action step and assist you in staying on track.”
Thanks!
Break Down Goals Into Smaller Steps
To begin with, Klesinger said to ask yourself what is the specific goal you would like to accomplish? Purchase a home? Pay down debt? Save for a new car? Save for an early retirement?
“Identify the goal and then niche down on the specificity of it,” he advised. “A goal that is SMART is quantifiable, easily measured and thus able to be celebrated when reached.”
For example, if you are looking to save for a house, the goal of saving $100,000 may not seem achievable and is daunting. Setting a goal to save $20,000 by the end of 2024 is more achievable.
“The goal can then be broken down into smaller steps such as a monthly amount of savings, or weekly, etc.”
Have a Time-Bound Goal
According to Klesinger, having a time-bound goal that is easily trackable will allow you to assess your progress toward your goal. Additionally, breaking your goal into smaller chunks will allow you to celebrate a win when you reach it.
“If you do not meet your goal in July, you can still work toward reaching it in September,” Klesinger said. “Just because you miss one month, week or day, does not mean you need to throw in the towel. Good habits stick and it is the ongoing achievement of small wins that lead to larger ones.”
How SMART Goals Have Worked for Others
“I rely on SMART goals to help my clients achieve financial success,” said David L. Blain, CFA and chief executive officer at BlueSky Wealth Advisors. “For example, a young couple came to me with $50,000 in credit card debt and wanted to buy a home in three years. We set a SMART goal to pay off their debt in 18 months by putting $2,800 per month toward the balances.”
He said this goal was specific in the amount and timeline, measurable in the monthly payment, achievable if they cut back spending, relevant to their homebuying goal and time-bound.
“They paid off the debt in just over a year and bought their dream home.”
Additionally, for his firm, he said SMART goals drive their key growth initiatives.
“This year, we set a goal to add 50 new clients in 12 months through an educational marketing campaign targeting new retirees,” Blain shared. “We hold free seminars on retirement planning and Social Security strategies. This goal is specific, measurable, achievable with work, relevant to growing the firm and time-bound. We’re on track to exceed our new client goal by 30% this year.”
Blain noted that the power of SMART goals lies in creating a roadmap where the destination is clear. Start with your vision, break it into concrete short-term goals, review progress regularly and revise as needed.
“While simple, SMART goals provide the accountability and motivation to accomplish important life milestones when used properly. Achieving one goal builds momentum for the next, creating a cycle of progress and success.”
