financial goals

How to Use the S.M.A.R.T. Goal-Setting Framework to Set and Achieve Financial Goals

A Savvy Strategy for Meeting Your Money Objectives

If you want to achieve your life’s goals, you must first envision them and then create expectations for yourself. When you begin to see your goals as reality, it can become easier to see how to reach them, too. However, this can often feel like an uphill battle – especially when it comes to your financial goals.

Planning for success in your financial future is a challenge, but you can help yourself stay focused and on track by setting the right type of goals at the outset. To improve your chances of success, set S.M.A.R.T. financial goals.

What are S.M.A.R.T. Goals?

The above acronym stands for: Specific. Measurable. Actionable. Realistic. Timely.

This formula for goal-setting was created by George T. Doran in 1981 and is said to help you visualize and plan for the end result, determine the steps you’ll need to get there, and understand your starting point for each goal, too. This process can feel a bit cumbersome, but we’ll walk you through each element below.

Get SPECIFIC to Improve Your Outcome

The more specific your goal is, the more likely you are to plan for it – and to achieve it. Here’s why: a more specific goal means more information available about how to get there, allowing you to narrow your focus toward the specific outcome you desire.

To begin getting specific with your goals, start with simply describing them to yourself. For example, many people have a goal to “buy a new home.” S.M.A.R.T. goal-setting encourages you to turn that general goal into something like “buy a new home worth $300,000 with a $50,000 down payment before age 35.” Adding specific details gives you a much better chance of achieving this goal because it gives you more information about the blueprint you’ll need to get there.

If you’re struggling with the specificity of your goal, try breaking it down using a “Who, What, When Where, Why, How” exercise and simply assign an answer to each one. This is a great place to start when you’re stuck or need inspiration to clarify your goal.

Make Sure Your Financial Goals are MEASURABLE

After getting specific, the next step in the S.M.A.R.T. goal-setting framework is to ensure you’re setting measurable goals. Think about the methods you can use to determine whether you’re making progress, and consider setting a schedule for making frequent check-ins, too.

Going back to the home purchase goal mentioned above, for instance, an easy way to measure whether you are making progress toward a $50,000 down payment is to keep track of your savings. Think beyond that, though. Could you also measure whether you are spending under a certain threshold each month in order to contribute further your savings? Think about measurements that will allow you to celebrate small successes and increase your motivation to continue forward, and utilize apps like Mint that can provide easy access to the measurements that are important to you.


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Choose Goals that are ACHIEVABLE

In theory, there’s nothing wrong with shooting for the stars. In practice, however, you want your financial goals to be achievable. This requires taking a look at your current situation and the resources you have available. It can be a bit depressing to have to go back to the drawing board and make changes to your goals, but think how much better you’ll feel achieving something instead of setting yourself up for failure from the outset.

For example, if you’re 33 years old and you have little savings, it may not be possible to save $50,000 for a home down payment before age 35. If you find yourself in a scenario like this, here are a few things you might do:

  1. Admit that your initial goal is out of reach and set your sites a bit lower. This could mean spending less on a home or making a smaller down payment.
  2. Keep your final outcome as is, but lengthen your timeline to, say, age 40.
  3. Consider tackling smaller goals first that will act as stepping stones towards your dream home purchase, like paying off debt so you can save for your down payment more quickly in the future.

Keep in mind that setting achievable goals and setting yourself up for success isn’t the same thing as setting “easy” goals. Each goal you set under the S.M.A.R.T. system should still be challenging, but something you’re capable of reaching, too. When you set goals that are impossible to reach, you’re bound to become frustrated and deterred from taking consistent action. Achievable goals, on the other hand, provide you with motivation and encouragement as you move confidently toward them.

Ensure Your Goals are Realistic

You may notice some overlap between making your goals achievable and making them realistic, but there are important differences. Setting an achievable goal means asking yourself whether or not you can meet it now or in the future, even if that means making changes. Setting a realistic goal, on the other hand, is about determining whether your specific, achievable goal makes sense for your life circumstances now and into the future.

Setting realistic financial goals is a lot like living within your means. Leave a margin of error, knowing that life often throws you curveballs that will set you back in your goal attainment from time to time, especially for long-term goals. When this happens, rest assured that it’s just part of the process.


SEE ALSO: Planning Assumptions That Should be Avoided


Set Timely Goals

The last step in setting S.M.A.R.T. goals is to make them timely. You can also think of the ‘T’ as standing for time-bound, timeframe, or time-limited if those make more sense to you. Every financial goal you set should have a timeframe associated with it. When you place a timeframe around your goals, you’re more likely to take consistent action, rather than letting time slip away because there’s no deadline for achievement.

In the home purchase example, we have been using, the timeframe of the goal is by age 35. Having a timeline can also help with goal measurability, especially if you set periodic check-ins for yourself where you can assess your progress. In this way, time is one of the best indicators of whether you’re making headway toward what you hope to achieve.

Optimizing Your Chances for Success with S.M.A.R.T. Goal-Setting

Using S.M.A.R.T. goals can take some getting used to, but when you stick to the process you are likely to find more success with them in the end. The truth is, all goals are not created equal, and your financial health requires thoughtful and savvy goal-setting.

Your financial goals should always be a combination of short-term goals and long-term ones. The nearer-term goals help you to reinforce solid financial habits and provide you with steady motivation to keep moving forward. Your longer-term goals will continue to guide you toward where you want to be.

For the best results, spend thoughtful time on each step of the S.M.A.R.T. framework as they relate to each goal. Then, take a more overarching view and build a financial plan that fits your goals, too.

If you think you can benefit from professional guidance in your financial goal-setting and planning, please consider scheduling a call with us to discuss your unique situation. At Paces Ferry, we succeed when our clients meet their goals and are on the road to financial freedom, and we provide a high level of support to help you get there.


Paces Ferry Wealth Advisors, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”).  This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.

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