Hi, One thing is not very clear to me. Let's go back to the budgeting strategy 50-30-20%. Maybe this is a dumb question, but here it goes. Example: I want to save 5000Eur to buy a second hand car. My goal is to save 250Eur per month, which means it will take me 20 months to buy the car. Are those 250Eur coming from the 20% I save each month or should I be saving 250Eur extra each month? Thank you.

OK. I'd say that the 250 per month are part of your program to save. The budgeting model does not say that you should never spend what you have saved, but that you should get into the habit of "living from" the portion of your income that is left after you have deducted 20% for saving. One of the principles here is to have that emergency fund in your savings. So if you have that much "secure" and then build up the money for the car atop it, go ahead and buy the car. Just don't dip into the saved emergency fund to do it. And after the car is purchased, continue saving 20% per month, just on principle.

OK. That's a clear goal. Have you any idea how much a car costs? Learning that number would help you set up a structure to get to your goal. Don't forget to consider the costs of owning (taxes, insurance, fuel, maintenance, etc.) You don't want to get a car just to have it parked in a garage someplace. Go to it, and enjoy the ride once it arrives!

i want to buy a tablet for art college.

A tablet is a good thing to aim for. Have you considered the other costs of art college? They can be high. If your resources are limited, you might consider starting in the Art department at a community college, where tuition is lower, and you might be able to continue living at home and then not have to pay for room and board.

"I want to save $57,600 by setting aside from my paycheck $2,400 per month for two years for building a better shop to work in more comfortably and use the old shop as storage." Is this an example of a SMART goal? I want to test myself to see if I understand this completely.

You should make sure that your goals are doable. Most people can’t save $2,400 a month simply because they’re spending their income on mandatory and discretionary expenses. Unless you think that your savings would be at about a 20% margin of your income, then I would lower your numbers to make them more realistic.

i want to build a house i don't have to pay rent

That sounds like a good idea. If to build that house you need to purchase some land, and contract for someone to dig the basement and make the foundation that you will build on, you might have to borrow some money. Likewise for the wood, windows, doors, pipes, wires and other materials that go into it. You have a good idea about building for yourself so that you don't have to pay rent. But, if you have to borrow money to accomplish your goal, and then pay interest on the loan, you'll be, effectively, renting the money. One way or another, unless we inherit a bundle from somewhere, we pay rent, don't we?

Main content

Course: Financial Literacy > Unit 4

Lesson 3: SMART goals

Writing your own SMART goals

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Writing your own SMART goals involves creating personalized objectives that are Specific, Measurable, Achievable, Realistic, and Time-bound. This process helps in setting clear and attainable targets, which ultimately improve your chances of personal and professional growth.

How to write your own SMART financial goals

Now that you know what SMART goals are, you can use them to write your own financial goals. Here are some steps to follow:

Think of a financial goal that you want to achieve. It can be short-term (within a year), medium-term (within a few years), or long-term (more than five years). It can be related to saving, spending, earning, investing, or giving money. For example, you may want to save for a car, pay off your student loans, start a business, or donate to a charity.
Write down your goal in one sentence, using the SMART criteria. Use the questions and examples above to help you. For example, you may write, "I want to save $$ 5,000$ ‍ for a used car by saving $$ 200$ ‍ from each monthly paycheck for $25$ ‍ months, because I want to have more independence".
Check your goal for clarity, realism, and relevance. Ask yourself: Is my goal specific enough? Can I measure my progress? Is my goal achievable with my current resources and abilities? Is my goal realistic given all the limitations? Is my goal time-bound with a realistic deadline?
Adjust your goal if needed. If your goal is too vague, broad, or easy, make it more specific, narrow, or challenging. If your goal is too ambitious, complex, or hard, make it more realistic, simple, or manageable. For example, you may adjust your goal of saving $$ 5,000$ ‍ for a car to $$ 4,000$ ‍, or to $$ 6,000$ ‍. You may also adjust your timeline, your savings amount, or your income source, depending on your situation.
Write down the action steps that you need to take to achieve your goal. These are the tasks, strategies, or habits that will help you move closer to your goal. For example, some action steps for saving $$ 5,000$ ‍ for a car may be opening a separate savings account, creating a budget, cutting down on unnecessary expenses, finding a second job, or setting up monthly automatic transfers.
Review your goal and action steps regularly. Track your progress, celebrate your achievements, and address any challenges or obstacles that may arise. For example, you may review your goal and action steps every month, and record how much money you have saved, what worked well, and what needs improvement. You may also reward yourself for reaching milestones, such as saving $25 %$ ‍, $50 %$ ‍, or $75 %$ ‍ of your goal.

SMART financial goals template

To help you practice writing your own SMART financial goals, you can also use this worksheet. Fill in the blanks with your own information, and check the boxes if your goal meets the SMART criteria.

SMART financial goals examples

Here are some examples of common financial goals, and how to make them SMART. You can use them as inspiration or reference for your own goals.

Saving for an emergency fund

Vague goal: I want to save some money for emergencies.
SMART goal: I want to save $$ 3,000$ ‍ for an emergency fund by putting $$ 100$ ‍ aside from each biweekly paycheck for $30$ ‍ weeks, because I want to be prepared for unexpected expenses and avoid going into debt.

Paying off debt

Vague goal: I want to pay off my credit card debt.
SMART goal: I want to pay off my $$ 2,000$ ‍ credit card debt by paying $$ 200$ ‍ extra every month for $10$ ‍ months, because I want to save money on interest and improve my credit score.

Buying a car

Vague goal: I want to buy a car.
SMART goal: I want to buy a $$ 5,000$ ‍ used car by saving $$ 200$ ‍ from each monthly paycheck for $25$ ‍ months, because I want to have more independence.

Saving for retirement

Vague goal: I want to save for retirement.
SMART goal: I want to save $$ 500,000$ ‍ for retirement by contributing $10 %$ ‍ of my income to a 401(k) plan for $30$ ‍ years, because I want to enjoy a comfortable and secure lifestyle when I stop working.

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Joana
Posted 8 months ago. Direct link to Joana's post “Hi, One thing is not ver...”
Hi,

One thing is not very clear to me. Let's go back to the budgeting strategy 50-30-20%. Maybe this is a dumb question, but here it goes.
Example: I want to save 5000Eur to buy a second hand car. My goal is to save 250Eur per month, which means it will take me 20 months to buy the car. Are those 250Eur coming from the 20% I save each month or should I be saving 250Eur extra each month?

Thank you.
Button navigates to signup pageComment on Joana's post “Hi, One thing is not ver...”
(8 votes)
Answer
- David Alexander
  Posted 8 months ago. Direct link to David Alexander's post “OK. I'd say that the 250...”
  OK. I'd say that the 250 per month are part of your program to save. The budgeting model does not say that you should never spend what you have saved, but that you should get into the habit of "living from" the portion of your income that is left after you have deducted 20% for saving.
  One of the principles here is to have that emergency fund in your savings. So if you have that much "secure" and then build up the money for the car atop it, go ahead and buy the car. Just don't dip into the saved emergency fund to do it. And after the car is purchased, continue saving 20% per month, just on principle.
  Button navigates to signup page
  (7 votes)
Scoreboard_HR
Posted 10 months ago. Direct link to Scoreboard_HR's post “I want to buy a car.”
I want to buy a car.
Button navigates to signup pageButton navigates to signup page
(6 votes)
Answer
- David Alexander
  Posted 10 months ago. Direct link to David Alexander's post “OK. That's a clear goal. ...”
  OK. That's a clear goal. Have you any idea how much a car costs? Learning that number would help you set up a structure to get to your goal. Don't forget to consider the costs of owning (taxes, insurance, fuel, maintenance, etc.) You don't want to get a car just to have it parked in a garage someplace.
  
  Go to it, and enjoy the ride once it arrives!
  Comment on David Alexander's post “OK. That's a clear goal. ...”
  (10 votes)
evanjelynnwilliams
Posted 8 months ago. Direct link to evanjelynnwilliams's post “i want to buy a tablet fo...”
i want to buy a tablet for art college.
Button navigates to signup pageButton navigates to signup page
(2 votes)
Answer
- David Alexander
  Posted 8 months ago. Direct link to David Alexander's post “A tablet is a good thing ...”
  A tablet is a good thing to aim for.
  Have you considered the other costs of art college? They can be high. If your resources are limited, you might consider starting in the Art department at a community college, where tuition is lower, and you might be able to continue living at home and then not have to pay for room and board.
  Comment on David Alexander's post “A tablet is a good thing ...”
  (4 votes)
Financial learner
Posted 4 months ago. Direct link to Financial learner's post “I want to buy a car when ...”
I want to buy a car when I am 10 years old
Button navigates to signup pageComment on Financial learner's post “I want to buy a car when ...”
(3 votes)
Answer
Jake
Posted 7 months ago. Direct link to Jake's post “"I want to save $57,600 b...”
"I want to save $57,600 by setting aside from my paycheck $2,400 per month for two years for building a better shop to work in more comfortably and use the old shop as storage."

Is this an example of a SMART goal? I want to test myself to see if I understand this completely.
Button navigates to signup pageButton navigates to signup page
(1 vote)
Answer
- William Wang
  Posted 7 months ago. Direct link to William Wang's post “You should make sure that...”
  You should make sure that your goals are doable. Most people can’t save $2,400 a month simply because they’re spending their income on mandatory and discretionary expenses.
  
  Unless you think that your savings would be at about a 20% margin of your income, then I would lower your numbers to make them more realistic.
  Button navigates to signup page
  (3 votes)
tonit1001
Posted 3 months ago. Direct link to tonit1001's post “I want to buy car”
I want to buy car
Button navigates to signup pageComment on tonit1001's post “I want to buy car”
(2 votes)
Answer
- David Alexander
  Posted 3 months ago. Direct link to David Alexander's post “Good. That's a great goal...”
  Good. That's a great goal. Be sure to include the cost of operation in your target amount for saving.
  Button navigates to signup page
  (1 vote)
RickeyW
Posted 3 months ago. Direct link to RickeyW's post “I want to buy a house”
I want to buy a house
Button navigates to signup pageButton navigates to signup page
(2 votes)
Answer
- David Alexander
  Posted 3 months ago. Direct link to David Alexander's post “That is a noble goal. Go ...”
  That is a noble goal. Go for it!
  Button navigates to signup page
  (1 vote)
Nathan Cote
Posted 6 months ago. Direct link to Nathan Cote's post “Very Interesting. Would w...”
Very Interesting. Would writing down a SMART goal help you fine tone your money personality?
Button navigates to signup pageButton navigates to signup page
(2 votes)
Answer
r.bouie5
Posted 5 months ago. Direct link to r.bouie5's post “i want to build a house i...”
i want to build a house i don't have to pay rent
Button navigates to signup pageButton navigates to signup page
(1 vote)
Answer
- David Alexander
  Posted 5 months ago. Direct link to David Alexander's post “That sounds like a good i...”
  That sounds like a good idea. If to build that house you need to purchase some land, and contract for someone to dig the basement and make the foundation that you will build on, you might have to borrow some money. Likewise for the wood, windows, doors, pipes, wires and other materials that go into it. You have a good idea about building for yourself so that you don't have to pay rent. But, if you have to borrow money to accomplish your goal, and then pay interest on the loan, you'll be, effectively, renting the money.
  
  One way or another, unless we inherit a bundle from somewhere, we pay rent, don't we?
  Button navigates to signup page
  (2 votes)
DixieT
Posted 3 months ago. Direct link to DixieT's post “i want to buy a ranch in ...”
i want to buy a ranch in 5 years
Button navigates to signup pageButton navigates to signup page
(1 vote)
Answer