How to Set SMART Financial Goals to Gain Financial Freedom

Financial goals are essential for your future success. You need to make sure you are setting goals that are SMART in order to reach your fullest potential.

Are you someone who is always setting new goals? You know, the type — where for every new year, you vow to hit the gym more, spend more time with friends, eat healthier, and save more money. Unfortunately, by the end of that same year, most of us have already forgotten our resolutions, and we're right back to square one.

This can be a vicious cycle. You need to break it by mastering your money and creating financial goals with staying power. If you've been struggling to keep your New Year's Resolutions this year, too, then it's time you learn how to set SMART financial goals that will last beyond January. 

How to create financial goals using the SMART method

First, you need to decide on what type of goal you want to set. The acronym SMART stands for Specific, Measurable, Action-oriented, Realistic, and Time-based. When setting any type of goal, it is essential to use these principles in order to ensure success. You can divide a major goal into smaller, more achievable chunks using the SMART method of goal setting. As you work toward your financial objectives, this will assist you in remaining concentrated and monitoring your progress.

There are four types of financial goals: Saving, Investment, Debt Repayment, and a combination of any two. Let's break down each one: 

- Saving: This is the amount of money you need to have saved in order to take care of any emergencies that might pop up in the future. 

- Investment: The act of investing involves putting money into a product or service that has the potential to increase in value over time. 

- Debt Repayment: This is when you use your extra money to pay down your debt as quickly as possible.

Specific Financial Goals

Your financial goals will be more effective and relevant if you make them specific. What are your future desires? What are your short-term needs? What are your long-term aspirations? What do you want for your family? 

There are two categories you can use to help you set your specific financial goals: Saving and Investment Goals and Debt Repayment Goals Depending on which goals you want to set; you will use financial numbers or percentages to measure your success. Make sure each objective is precise, measurable, and understandable.

Measurable Financial Goals

Your financial goals should be measurable. This implies that you are fully aware of the amount of money you must earn or save in order to achieve your financial objectives. Let's take a look at an illustration of how to set a quantifiable financial objective. Let's say you want to retire comfortably by the time you turn 60. According to the Social Security website, you will need around $1,000 per month in order to retire comfortably. In order to reach that goal, you will need to start saving money at a very young age. 

The best way to do this is by setting up a retirement savings account. You can start off with as little as $25 per month, but you should be aiming to save as much as you can. All of that money will grow over time thanks to compound interest. If you are able to max out your retirement account every year, you can easily reach that $1,000 goal. That is just one example of how you can set a measurable financial goal.

Action-oriented Financial Goals

Your financial goals should be action-oriented. Ideally, your financial goals will be SMART goals. Let's say you want to save $1,000. Your goal becomes, "Save $1,000 in my savings account by the end of the year." Your goal becomes actionable. You know what you need to do and when you need to do it. Each financial goal should be action-oriented in order to be successful. 

You may want to throw in a few mini-goals along the way as well. For example, you might want to start off by setting up a monthly contribution to your retirement account. This is a great way to earn compound interest on your money and really make it grow over time.

Realistic Financial Goals

Your financial goals should be realistic. Remember, you want to set goals that are within your control. You don't want to set goals that are too lofty or far out of reach; you want to set goals that you know you can achieve. You want to set goals that are attainable and realistic. You also want to set goals that are specific, measurable, and action-oriented. 

Now, it is also important to set financial goals that are also time-based. This means that you must ensure that your objectives have a deadline. You have to have a date in mind when your goal will be accomplished.

Time-based Financial Goals

Your financial goals should be time-based. You should have a date in mind when you will achieve each of your financial goals. For instance, you might want to save $2,000 by the end of the year for your emergency fund. You ought to have a target date in mind by which you hope to have saved that cash. You should have a date in mind when you will have saved that money. If you make sure that every goal has a specific date attached to it, you are much more likely to see success.

Decide on a saving goal

You want to start by setting a saving goal. This is the amount of money that you want to have saved in order to take care of any emergencies that might pop up in the future. Your savings account should ideally contain at least three months' worth of living expenses. You can never predict when something unforeseen might occur.

Whether it's your car breaking down, your roof leaking, or your computer breaking, you should be prepared for anything with a savings account. If you have no emergency fund, then you will have to turn to credit cards in a moment of financial desperation. Credit cards are not a good idea, as they usually have extremely high-interest rates. Therefore, you should have an emergency fund in place as soon as possible. You should try to save at least $1,000 in your emergency fund.

Decide on an investing goal

You want to set an investing goal. You want to put this much money into your long-term financial future. Ideally, you want to start investing as early as possible. Your money has more time to grow the earlier you start investing. Investing can seem intimidating at first, but it does not have to be. 

For beginners, there are many low-risk investment options available. You can start off by investing in a low-fee, tax-efficient exchange-traded fund (ETF). In order for your investment to pay off, you need to be patient. The longer your money has to grow, the sooner you should begin investing. Try to set aside at least 10% of your gross income for savings. Long-term, this will make it simpler for you to achieve your financial objectives.

Decide on a debt repayment goal

Your objective should be to pay off your debt. You must have this much cash on hand to pay off your debt as quickly as possible. Ideally, you should be paying off your highest interest-rate debt first. This is usually credit card debt. Credit cards usually come with very high-interest rates, which means they cost you money. 

Therefore, it is best to pay them off as quickly as possible. You should try to pay off at least $1,000 worth of debt each month. This will help you to get out of debt faster. You will see progress much quicker when you are focused on a single goal.

Final Words

Financial goals are essential for your future success. You need to make sure you are setting goals that are SMART in order to reach your fullest potential. Each of your financial objectives needs to be time-based, realistic, specific, measurable, and action-oriented. This will greatly increase your chances of success. Visit Clubmoney.com to learn more about how to best save money and gain financial freedom.