What are SMART finance goals?

When you imagine what your future holds, what do you see? Many of the most common life goals involve some form of financial planning. But sometimes, our plans remain daydreams if we don’t know how to start working towards them. That’s where the power of effective goal-setting comes in. 

In this blog, Loqbox shows you how SMART financial goals could help you make your ambitions a reality. Whether you’re saving for a more secure future, dreaming of owning your own home, or planning to unlock new financial opportunities, setting SMART finance  goals can help you to plan, maintain, and achieve the future you want. 

Sure, finance can feel daunting (or boring!). But SMART finance is about imagining what your future could be and reaching out to grab it with both hands. And setting SMART goals for personal finance could be easier than you think. 

What are SMART finance goals?

So what are SMART financial goals? The SMART acronym stands for: Specific, Measurable, Achievable, Relevant, and Timebound. 

SMART goals in finance give you a great framework to structure your financial objectives effectively and offer an easy-to-follow roadmap to success. If you want to tackle that big house project, or create an emergency fund. These are the tools you need. 

You might be wondering how setting SMART financial goals could help you? Everybody’s SMART financial goals will be unique and personal to their individual circumstances. If there are things that you hope to achieve that require money, setting SMART financial goals could empower you to be whoever, or do whatever, you want.

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SMART guidelines for personal finance goals

Let’s dive into these SMART financial objectives in more detail:

• Specific
• Measurable
• Achievable
• Relevant
• Timebound

Specific

When setting SMART money goals, it’s important to be specific. These are YOUR goals, and they should be relevant to your individual wants and needs. Avoid vague objectives like: “Save money”. Instead, take some time to be money mindful. You could ask yourself what you’re saving for? A dream house? A new car? A bucket list holiday? Before you start you need to know exactly what you want, and why.

Setting specific objectives can help you to stay motivated. To achieve your  SMART financial goals you need to be passionate and genuinely eager to succeed. That could be the rocket fuel you need to get over the finish line. So, be honest with yourself about what you really want and need, and be specific when setting your goals.

Measurable

Break down your goals so that they’re measurable. That means attaching some numbers to your objectives. How much is the car you want to buy? How many points do you want to gain when you boost your credit score? What’s the total amount of debt you need to clear? These measurable targets can help you track your progress and stay on target. Again, this helps with motivation as you see your target getting closer.

Achievable

Set attainable goals that are within financial reach, taking into account your income and expenses. Break your total target into bitesize milestones to hit every month. By using the 50 20 30 rule, you might find you’re able to commit 20% of your monthly income to your financial goals. Does that number match with your bitesize milestones? If so, you're good to go!

This isn’t about limiting yourself and your dreams. It’s about setting yourself up for success: If you start with a smaller goal and you manage to smash it, that might encourage you to tackle the next one. 

Relevant

Knowing your “why” can help you stay motivated, so try to set goals that are relevant to you and your journey with money. 

For example, if you’re setting SMART goals for saving money, make sure that you’re saving for something that feels meaningful and will help you improve your financial wellbeing. For example: It’s much easier to do the work on saving money each month if you know that having money set aside will help you feel more confident about your financial future. 

Know that your goals are relevant: Master your money with a free financial plan from Loqbox

Timebound

Create specific timeframes within which you aim to achieve your financial targets. For example, aiming to save £10,000 for a car in two years. We all know about the power of deadlines. They’re great for limiting procrastination. But a timeframe here will also help you to break your target into realistic and attainable milestones. 

SMART goals: financial examples

Short-term SMART financial goals: Examples

• Paying off credit card debt of £2,000 in the next six months.
• Saving £1,000 by the end of the quarter for an emergency fund.
• Increasing monthly savings by £200 within three months.

Taking the first example of paying off your credit card debt, let’s break it into a SMART financial goal:

• Specific: I am going to pay off my credit card debt.
• Measurable: My credit card debt is £2,000.
• Achievable: I need to pay £333.33 per month. My monthly post-tax income is £2,500. 20% is £500. I can afford it!
• Relevant: Being in debt has been making me feel stressed, and I’m wasting money on interest payments. 
• Timebound: I am going to pay it off in six months.

Long-term SMART financial goals: Examples

• Accumulating £100,000 for retirement in 15 years.
• Saving £20,000 for a deposit on a house in five years.
• Investing £5,000 annually in a diverse portfolio for wealth growth.

Taking the first example of growing a retirement fund, let’s break it into a SMART financial goal:

• Specific: I am going to grow a retirement fund.
• Measurable: My retirement fund needs to be £100,000.
• Achievable: I need to pay £555.55 per month. My monthly post tax income is £3,000. 20% is £600. I can afford it!
• Relevant:  I am looking forward to having more time to travel when I retire, and this money will help me to look forward to retirement.
• Timebound: I am going to save towards my target in 15 years.

Is SMART finance for you?

‍Setting SMART finance goals is not just about having the right strategy. It’s also about having the right mindset. SMART money goals empower you to take control of your financial future, make informed decisions, and pave the way for a more stable an