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Course: Financial Literacy > Unit 4
Lesson 3: SMART goalsSMART goals
SMART goals are a method to set specific, measurable, achievable, realistic, and time-bound objectives. They help you stay focused and organized, making it easier to track progress and accomplish your goals.
How to write SMART financial goals
Have you ever dreamed of saving enough money to buy a car, travel, or retire comfortably? These are examples of financial goals. Financial goals can help you plan your budget, track your progress, and stay motivated.
But not all financial goals are created equal. Some goals are vague, unrealistic, or hard to measure, which can make them difficult to reach. For example, saying "I want to save more money" is not a very helpful goal, because it does not explain how much money, why you want to save, or when you need the money to be saved by.
A better way to write financial goals is to use the SMART method. SMART stands for Specific, Measurable, Achievable, Realistic, and Time-bound. These are five criteria that can help you make your goals clear, realistic, and trackable.
Let's look at each one in more detail and turn the basic goal of, "I want to save money" into a SMART goal.
S-Specific
A specific goal tells you exactly what you want to accomplish. This means that when you set a goal for yourself, you should try to make it as detailed as possible. By making your goal specific, you know exactly what you need to do in order to achieve it.
For example, we can make our goal specific by changing it to, "I want to save money for an emergency fund".
M-Measurable
A measurable goal tells you how you will know if you are making progress or if you have achieved your goal. It answers the question: How much or How many. A measurable goal helps you monitor your performance and celebrate your success.
For example, we can make our goal measurable by changing it to, "I want to save for an emergency fund."
A-Achievable
An achievable goal tells you if your goal is realistic and possible, given your current situation, resources, and abilities. It answers the question: How can I do it? For example, the goal of saving for an emergency fund is achievable, if you have a steady income, a budget, and a savings account. An achievable goal challenges you but does not overwhelm you.
For example, we can make our goal achievable by changing it to, "I want to save for an emergency fund by saving per paycheck."
R-Realistic
A realistic goal is something you believe you can reach or accomplish. It's something that fits into your life, your abilities, and your resources, but it also takes into account your limitations. For instance, if you earn a week, saving a week might not be realistic. But saving could be!
Achievable and realistic may seem similar but they have slight differences. When a goal is achievable, it means you have the skills, resources, and abilities to reach it.
For example, if we look at our previous achievable statement "I want to save for an emergency fund by saving per paycheck. Since you have a job, this goal is achievable. But if you have bills, food and other essentials, and maybe also want to hang out with friends occasionally, saving each paycheck might not be realistic. So, you may change the amount to a smaller one, or change the statement to "I want to save for an emergency fund by saving every other paycheck.
T-Time-bound
A time-bound goal tells you when you want to achieve your goal or what is your deadline. It answers the question: When will I do it? A time-bound goal helps you create a sense of urgency and accountability.
For example, we can make our goal Time-bound by changing it to, "I want to save for an emergency fund by saving per paycheck for weeks."
Want to join the conversation?
- No one:
DUMB goals:
D angerous
U nattainable
M alevolent
B arbarous(65 votes)- I think B is for Barbaric(3 votes)
- A SMART goal can cause anxiety.(3 votes)
- Life itself causes anxiety in many of us. But life is our most basic choice.(32 votes)
- Why do you have to keep a pay check?(4 votes)
- You don't have to keep it. You take it to the bank and turn it into cash.(4 votes)
- A SMART goal can cause anxiety.(1 vote)
- what if you miss one of the steps in the S-M-A-R-T(2 votes)
- Then, just like if you miss a base while running around the baseball diamond, you go back and step on it.(3 votes)
- How can a smart goal cause anxiety(1 vote)
- Life itself causes anxiety. You might feel that your goal is demanding that you perform in a particularly anxious way.(3 votes)
- How can a smart goal cause anxiety?(2 votes)
- Why does money have to be deducted from your paycheck every-time you get paid?(1 vote)
- It seems to me that you are asking about paycheck deductions instead of Smart Goals (which is the subject of this lesson). If that is so, the deductions that come every time are because the amounts that they build up to are likely more than one paycheck could cover. For example, your income tax for the year is maybe 12% of what you earn. If that were to be taken out all at once, and you started working on January 1st, you wouldn't get to take anything home until late in February. But, Social security is another 8%, so paying that next, and in full, would take all the rest of your pay for another month. Then Medicare would take another week's pay, and other necessary things even more.
By taking a small portion of EVERY paycheck throughout the year, these things get paid off in time, and you take home about 70% of what you have earned in every pay period.(1 vote)
- (Please don't get mad that this is not a question)
Hey everyone! If you have a SMART goal that you are working towards, let me know in the comments of this question.
I don't have a SMART goal but I am saving up for some Pokemon cards that will be released soon.(1 vote)