How to Set SMART Financial Savings Goals

Woman writing on a white board with ideas and goals

When you have a huge goal in front of you, whether it’s financial like starting a new business or paying for college, or whether it’s health-related, like losing weight, the obstacles in your way can feel insurmountable. SMART is a method for writing and analyzing goals to make them achievable in your life.

SMART goals are Specific, Measurable, Achievable, Relevant and Time-Bound.The SMART methodology was introduced almost 40 years ago in an issue of Management Review magazine and has since been adopted by countless organizations and individuals.

Applying SMART to your personal financial savings goals can help you set achievable goals in everything from earning more money and paying down debt, to improving your credit score and investing in yourself.

Specific. For a personal finance goal to work, it must be specific. Instead of saying, “My goal is to get out of debt,” consider, “I want to eliminate $20,000 of my student loan debt in two years.” SMART evangelists will tell you to answer the questions of what, why, who, where and which, in order to build specificity into your goals.

  • What do you want to accomplish?
  • Why is this goal important?
  • Who needs to be involved to make it work?
  • Where does it need to happen?
  • Which other obstacles or constraints are you up against?

Measurable. If you want to cross the finish line, you need to know where the finish line is. For example, “I want to retire early” is not a measurable goal, but setting your retirement sights on age 65 is. The best way to know when you’ve accomplished your goal it to assign a number to it. A measurable financial goal has a dollar value and a period of time associated with it. “I will save $100,000 for my daughter’s college in 15 years” or “I want to put aside $1,000 a year towards my emergency fund”.  If it’s measurable, you have a way to track your progress and stay motivated.

Closeup of a teenage girl's hand with the phrase "Believe in your Dreams" written in permanent marker on it, with her smiling face blurred in the background

Achievable. Your goals need be attainable and realistic, or they lose momentum. Asking whether your goal is achievable will also force you to assess whether you currently possess the tools or skills your goal requires, and whether you’ll need to work toward attaining those tools in order to reach your goal. Assessing whether paying down $20,000 in debt in one year is achievable, for example, will require you to take a holistic look at your finances and budget. A personal financial management tool[  is invaluable in determining whether your savings goal is achievable.

Relevant. Determining the relevancy of your goal is all about figuring out where it fits into your life and relationships, and whether it aligns with your other goals. Does your savings goal really matter in your life? Does it have the support of your spouse, family and others whose help you’ll need to achieve it? If not, it will be difficult to make it a priority.

Time-bound. Give your goal a deadline. For example, “I will add $5,000 to my savings account in the next 18 months.” Putting your goal in a specific time frame makes that goal a priority and creates a sense of urgency. Vague end-dates leave room for other day-to-day obstacles to get in the way.

Need help thinking of goals to set for yourself? Check out our blog on 5 Financial Milestone to Hit in Your 20s and 30s for some ideas on where to start.