SMART goals (article) | Financial goals | Khan Academy (2024)

Have you ever dreamed of saving enough money to buy a car, travel, or retire comfortably? These are examples of financial goals. Financial goals can help you plan your budget, track your progress, and stay motivated.

But not all financial goals are created equal. Some goals are vague, unrealistic, or hard to measure, which can make them difficult to reach. For example, saying "I want to save more money" is not a very helpful goal, because it does not explain how much money, why you want to save, or when you need the money to be saved by.

A better way to write financial goals is to use the SMART method. SMART stands for Specific, Measurable, Achievable, Realistic, and Time-bound. These are five criteria that can help you make your goals clear, realistic, and trackable.

Let's look at each one in more detail and turn the basic goal of, "I want to save money" into a SMART goal.

A specific goal tells you exactly what you want to accomplish. This means that when you set a goal for yourself, you should try to make it as detailed as possible. By making your goal specific, you know exactly what you need to do in order to achieve it.

For example, we can make our goal specific by changing it to, "I want to save money for an emergency fund".

A measurable goal tells you how you will know if you are making progress or if you have achieved your goal. It answers the question: How much or How many. A measurable goal helps you monitor your performance and celebrate your success.

For example, we can make our goal measurable by changing it to, "I want to save $\mathrm{\$}\mathrm{1,000}$‍ for an emergency fund."

An achievable goal tells you if your goal is realistic and possible, given your current situation, resources, and abilities. It answers the question: How can I do it? For example, the goal of saving $\mathrm{\$}\mathrm{1,000}$‍ for an emergency fund is achievable, if you have a steady income, a budget, and a savings account. An achievable goal challenges you but does not overwhelm you.

For example, we can make our goal achievable by changing it to, "I want to save $\mathrm{\$}\mathrm{1,000}$‍ for an emergency fund by saving $\mathrm{\$}50$‍ per paycheck."

A realistic goal is something you believe you can reach or accomplish. It's something that fits into your life, your abilities, and your resources, but it also takes into account your limitations. For instance, if you earn $\mathrm{\$}100$‍ a week, saving $\mathrm{\$}80$‍ a week might not be realistic. But saving $\mathrm{\$}20$‍ could be!

Achievable and realistic may seem similar but they have slight differences. When a goal is achievable, it means you have the skills, resources, and abilities to reach it.

For example, if we look at our previous achievable statement "I want to save $\mathrm{\$}\mathrm{1,000}$‍ for an emergency fund by saving $\mathrm{\$}50$‍ per paycheck. Since you have a job, this goal is achievable. But if you have bills, food and other essentials, and maybe also want to hang out with friends occasionally, saving $\mathrm{\$}50$‍ each paycheck might not be realistic. So, you may change the amount to a smaller one, or change the statement to "I want to save $\mathrm{\$}\mathrm{1,000}$‍ for an emergency fund by saving $\mathrm{\$}50$‍ every other paycheck.

A time-bound goal tells you when you want to achieve your goal or what is your deadline. It answers the question: When will I do it? A time-bound goal helps you create a sense of urgency and accountability.

For example, we can make our goal Time-bound by changing it to, "I want to save $\mathrm{\$}\mathrm{1,000}$‍ for an emergency fund by saving $\mathrm{\$}50$‍ per paycheck for $20$‍ weeks."