“I want to be rich.” That is not a goal; that is a wish. Wishes don’t come true. Goals do.
If you want to actually change your bank account this year, you need the SMART framework. Here is How to Set SMART Financial Goals for the New Year.
What is SMART?
- S – Specific: Clear and detailed.
- M – Measurable: Trackable with numbers.
- A – Achievable: Realistic.
- R – Relevant: Matters to your life plan.
- T – Time-Bound: Has a deadline.
Example 1: Saving Money
Bad Goal: “I want to save more money.”
SMART Goal: “I will save $5,000 for an emergency fund by creating a budget and auto-transferring $416/month until December 31st.”
Example 2: Paying Off Debt
Bad Goal: “I want to get out of debt.”
SMART Goal: “I will pay off my $2,000 Visa card balance by paying an extra $200 above the minimum payment each month, becoming debt-free by October 15th.”
Example 3: Investing
Bad Goal: “I want to start investing.”
SMART Goal: “I will open a Roth IRA this week and contribute $100 every payday into an S&P 500 Index Fund for the next 12 months.”
Kiran’s Take: The “Why” Layer
The SMART framework is missing one letter: W (Why).
Why do you want to save $5,000? “To feel safe if I lose my job.”
Why do you want to pay off debt? “So I can travel without guilt.”
When you are tired and want to quit, the numbers won’t save you. The “Why” will. Write it down.
Conclusion
Stop making New Year’s Resolutions that you break by February. Make a plan. Write it down. Make it SMART. Then execute.
Need a tool to track this? Check out Best Budgeting Apps.
