I'm a strong believer in setting goals to create the life you've always wanted to live. And if we're looking to improve our financial situation, the best place to start is with goal setting.
Bill Copeland said it best … “The trouble with not having a goal is that you can spend your life running up and down the field and never score.”
We all want to score, right? Well, I believe that starts with making SMART financial goals.
What are SMART Goals?
SMART is an acronym that stands for:
To illustrate what each of these means, here’s an example of a SMART Goal: “I will pay off $6,000 of credit card debt in 6 months.”
As opposed to saying, I want to get better with money, this goal is specifically stating what you’ll do to get better with money.
You will see financial progress as this debt number goes from $6,000 to $0.
You will be paying off the credit card debt in full. That’s the action.
This is probably the most important part of SMART goal setting.
Do you have the means or the plan to pay off $6,000 in 6 months? Or is this unrealistic?
What helps is breaking this goal down into smaller mini-goals along the way. For example, do you have an extra $1,000 you could pay toward this debt each month for 6 months straight?
If not, how can you side hustle your way to an extra $1,000 per month or $250 per week?
If time is not on your side for extra side hustling, how can you lower your expenses by $1,000 per month?
Can you try out a no-spend challenge on the “extras” for a while?
I don’t have the answer to these questions for you, but you do! So make sure your goal is realistic.
This goal has a set date to it. It must be accomplished 6 months from now. Is this possible?
Is your credit card debt goal more realistic if you move it to 12 months?
Or do you want the challenge of doing this in 6 months? You decide and make a plan to get it done.
10 SMART Financial Goals
We’ve discussed what SMART goals are. Now, let’s discuss SMART financial goals.
Here's a list of 10 SMART financial goals for you to consider to help you improve your money situation.
1. Create and Live on a Budget for 3 Months Straight
When my wife and I started budgeting together in 2011, it was a rough start. We made mistakes, we forgot to include important budget line items and we had some disagreements on what we actually “needed” in our budget.
After about 3 months of updating, improving, and finding a middle ground, we got the hang of it.
Mint has been our go-to budgeting app for about a decade now. It helps us control our money so we ensure it aligns with our family goals.
Budget for 3 months straight and not only will your finances get better, but your marriage just might get better as well.
2. Begin Tracking Your Net Worth
Nicole and I thought we were rich in 2010. We had no kids and together we had a six-figure household income.
Then we discovered the term “net worth”. Evidently, if you owe (liabilities) more than you own (assets), then your net worth would be negative.
Yep, that was us.
We had a -$50,000 net worth and we were making over $100k per year together! It was madness.
Ever since that moment, we've been tracking our net worth because we were making too much money to be broke.
You can do this with a spreadsheet or a more advanced tool like Personal Capital that syncs up all of your accounts in one place and shows your progress over the years.
3. Complete Your Family Will
If you're married with kids, please get your last will and testament in place as soon as possible.
Nicole and I cranked our will out in a quick weekend and we were able to sleep easier.
If you have a complicated situation (business ownership, out-of-state properties, divorce, etc.), be sure to work with a lawyer you can trust.
And if your situation is more straightforward, check out a service like Trust & Will and complete it online.
Either way, it's always best to be prepared.
4. Eliminate Your Debt With the Highest Interest Rate
Debt can weigh you down. It's time to say, “No more!”
Look at all of your debts this week. Find the total balance and the interest rate that you're paying. Select the one with the highest interest rate and crush it!
Nicole and I had $48,032 of debt when we started our marriage and we used the “Debt Avalanche” method to pay down our debts with the highest interest rates one by one. It worked like a charm. We were consumer debt-free in less than 1 year.
5. Increase Your Tax-Advantaged Retirement Savings
Recently, our family retirement savings crossed over the $500,000 mark! For over a decade, we have been taking advantage of our workplace 401ks and Roth IRAs. This stuff REALLY starts to add up over time. Now, we're Coast FIRE and aren't really worried about contributing to our retirement much anymore. More money for enjoying today!
Take advantage of your tax-advantaged retirement options this year. Some of your options could include your 401k, 403b, 457, a Roth IRA or even a Health Savings Account (HSA).
In my opinion, low-cost index funds are a smart way to go with all of these options. You don't NEED to max anything out per se. Just make it a goal to increase your savings from where you are today and bump it up steadily over time.
6. Start a 529 College Savings Account for your Kids
I want to give my kids the opportunity to live a student debt-free life, but MAN the cost of college is freakin' insane!
By some estimates, the overall costs of college are increasing by around 6% annually. If we're saving for our kid's college costs in a brick-and-mortar bank account that's yielding less than 0.5% interest per year, we're more than 5% short … each year!
529 college savings plans will help you invest in the broader market, earn a better interest rate, and, depending on where you live, receive state tax benefits.
7. Sign Up for Term Life Insurance
If your family relies on your income or your time, you need life insurance. For almost all situations, term life insurance is the best way to go. It's low-cost and it gives you the coverage you need.
Nicole and I both have 30-year term policies.
Quotacy analyzes multiple providers on your behalf to get you the best coverage and price. I’ve been promoting their good service for years now on my blog and podcast.
8. Develop a Chore and Reward System for your Kids
Helping your kids learn the value of hard work and rewarding them for it will help you develop a legacy of winners in your family tree.
Developing a chore and reward system gives our kids the ability to contribute around the house, the independence to know they can solve important problems and you (as the hardworking parent) can finally get a breather.
You deserve it, Mom and Dad!
9. Think of a Side Hustle to Bring in Extra Money
If you have the drive and the willpower to start a side hustle, this is the year to do it.
On my podcast, I've interviewed over 300 personal finance experts, self-made millionaires and early retirees. The overwhelming majority of them attribute their financial success to diversifying their income streams and not solely relying on their day job.
What skills do you have that you could use to create value for someone outside of your 9-5 job?
I'm willing to bet you have a hidden passion that you could turn into a rewarding side business. This fun hustle has the potential to make you happier, healthier and wealthier this year
10. Ladder Up Your Giving
There was a point in our financial journey where we were giving 1% of our take-home pay. We felt like we could give more.
Over the next few years, we laddered up our giving.
- 1% in Year 1
- 3% in Year 2
- 5% in Year 3
Now we give 5% to charities and causes we appreciate. And another 5% goes to family, friends, and neighbors in need. It’s our own version of 10% giving.
If you feel like you can give more this year, make a SMART financial goal to ladder up your giving from where you are today to where you want to be later this year.
Final Thoughts on SMART Financial Goals to Build Wealth
Okay, everyone, the challenge has been laid DOWN! Who is in?
Please let me know in the comments below!
Also, I'd suggest shouting out these SMART financial goals on social media too! A public proclamation will hold you more accountable. When you share your goals with someone else, you are more likely to get them done.
Set those SMART financial goals, share them and get to work!
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