If you’re ready to tackle your short, medium, or long-term financial goals, but don’t know where to start, we’ve got you covered. Here are four steps to take action on your financial goals.
1. Apply the SMART framework
When setting goals, you can use the SMART framework to help you stay motivated and focused. In short, SMART is an acronym that means: specific, measurable, achievable, relevant, and timely. Here’s a more detailed breakdown:
Specific. “Be better with money” is a vague financial goal. How do you want to be better with money? Do you want to pay off your credit cards? How about saving money in an emergency fund? Or, perhaps you want to switch to a better bank account?
The options are endless, but you need to specify your financial goal to achieve it.
Measurable. Similarly, your money goal needs to be measurable. Otherwise, how do you know if you’ve succeeded or are making any progress?
You could say you want to pay off all of your credit card debt. Or save $5,000 in an emergency fund. Or have a new bank account open in the next month.
Achievable. When setting a financial goal, you want to make it reasonable, so you’re not setting yourself up for failure. For instance, giving yourself three months to save up for a large down payment might not be realistic.
Aim to pick a goal you can achieve within your given time frame. Otherwise, you might get frustrated and give up.
Relevant. Maybe a million dollars in a retirement account isn’t quite relevant to you. Instead, why not pick something that will immediately better your situation?
For example, if you know you’re going to need a new car in the next two years, starting to save up for one is a relevant goal. Or, maybe if you’re still in debt, getting rid of your high-interest credit card debt will be most relevant.
Timely. You also want to set a goal that you can achieve within a set time period. This requires you to accurately understand your financial situation so that you can pick a goal that you can realistically achieve in a specific amount of time.
2. Automate your finances
Ask computer programmers what the biggest source of error is in their line of work, and they might tell you it’s people.
The same thing is true for your finances. Humans are the biggest source of error in money management. But, good news: you can remove a lot of human error by automating your finances.
Here are a few ways you can do it:
- Set up automatic savings
- Set up your bills on auto-pay
- Set reminders on your phone or email to pay other bills (like utility bills that may vary each month)
- Set low-balance notifications on your accounts so you don’t overdraw your account, or find an account that offers fee-free overdraft
3. Find accountability buddies
It can be challenging to follow through with your money goals if you go it alone. But if you find an accountability partner who encourages you, that shared experience can help you succeed. If you succeed, you’ll have someone to help celebrate with you!
It’s helpful to find an accountability partner who’s working on the same goal as you. You can also consider hiring a money coach to help guide you.
4. Picture what success looks like
What does success look like for you? The answer to this question will help guide you through the smaller decisions you’ll need to make as you work towards your short, medium, and long-term financial goals.
For example, let’s say you want a fully-funded emergency fund. But to do that, you need to stop impulse spending. So, every time you head to a store and put a tempting item in your cart, stop and take a second to think. Are you willing to take money away that can potentially keep you afloat if you lose your job or have a health problem?
If you picture what success looks like — lasting financial peace of mind — you might be more likely to put that item back and stick to your savings goal.
