Key takeaways from this article:
If somebody asked you what yourfinancial goalsare, would you be able to articulate them? Weset goalsfor ourselves in almost all arenas of our lives from our careers to our exercise habits, and our finances should be no exception. Whether you’re aiming to pay off yourcredit carddebt, increase yourretirement savings, or would simply like to have someextra moneyin your pocket, there are manytypes offinancial goals. You may have a general idea about where you’d like to be financially in the future but the way in which weset goalsis as important as the goal itself. The following guide will help you map out yourfinancial goalsusing the SMART method and provide tips for how you can best achieve them.
The journey is as important as the destination
Two people that have the samefinancial goal, the same income and similar expenses may have vastly different experiences of achieving their goal. The difference is the system that they use to set and measure the goal. Goals provide you with direction but the method used to achieve them is what sets the progress in motion. Familiarising yourself with the SMART method is a useful first step in effectivegoal-settingand can be applied to your financial aspirations.
How to create SMARTfinancial goals
SMART goals are Specific,Measurable,Achievable, Realistic and anchored within aTime Frame. Applying this method to your finances can help you break down the goal into its key components.
S – State exactly what is to be done with your finances.
M – Outline how you’ll be able to track your progress.
A – Determine the practical steps you’ll take to achieve the goal.
R – Ensure the goal isachievablefor yourfinancial situation.
T – Give yourself a deadline for when the goal needs to be reached.
SMARTexamples offinancial goals
Let’s take a look at some hypothetical examples of how one might put a financialshort-term, mid-term and long-term goal through this filter.
Short-termfinancial goal
S – I will save $1000 to buy a new phone
M – I will open a separate account to deposit and view my savings in.
A – I will set up an automatic transfer that puts $100 of my pay check into mysavings accountevery fortnight.
R – This goal is attainable according to my income and budget.
T – In 20 weeks I will have achieved the goal.
Mid-termfinancial goal
S – I willsavemoneyfor adown paymenton a house.
M – I will need to save 10% of the property’s purchase price to achieve my goal.
A – I will open asavings accountwith ahighinterestrateand make monthly contributions of $500.
R – This goal is attainable according to my income and budget.
T - The number of months it will take to achieve the goal can be calculated by 10% of the property’s purchase price divided by $500.
Long-termfinancial goal
S – I will pay off my mortgage more quickly.
M – I will need to make the equivalent of an extra month’srepaymenteach year.
A – I will switch from monthly to fortnightly payments.
R - This goal is attainable according to my income and budget.
T – Thetimeframeis dependent on the cost of the mortgage and therepaymentamount.
How to achieve SMARTfinancial goals
When you setmoneygoalsthat are SMART, you’re already building strong foundations to attain them. Here are 7 tips to further set you up for success and help you achieve your goals.
Write them down
You’re more likely to hold yourself accountable when you put pen to paper. Keep a sticky-note of your goals somewhere where you can see it regularly like your desk or fridge to help you stay on track.
Organize your goals by priority
Understanding the driving motive behind a goal can help you know which to prioritise first. Divide your goals into the three categories of Critical, Need and Want. Start with the critical, most important goals and work your way through the list.
Be the tortoise, not the hare
Slow and steady wins the race. You’re more likely to achieve your goals when you make progress that is little and often. For example, if your goal is to save $500 a month, instead of planning to deposit themonths'worthof savings all in one go, plan to put aside $125 a week. Getting closer to your goal in small increments will help you have greater success in the long run. What’s more, the wording of your method, e.g. $500 a month vs $125 per week, can make the goal feel more attainable. For more advice, read our guide for setting up asavings plan.
Make it routine
Adding the steps you will take to achieve your goal to your weekly/monthly routine will help reinforce good habits until you just do them naturally. For example, if you make a fitness goal to run three times a week, it’s easier to stick to this goal when you assign yourself specific days of the week to run. The same concept can be applied to yourfinancial goals. Decide on a regular date in which you’ll make progress towards you goal, whether that involves personal banking, reviewing your spending andbudgetingor making a phone call - and stick to it!
Minimise reliance on moving parts
Don’t rely on other people or even yourself to take action to achieve your goals. Use the set-and-forget method. This entails setting up an automatic transfer to yoursavings account, so that even if you forget to make a deposit, you’ll make regular contributions without even thinking about it. Alternatively, if your goal is to only spend a certainamount of moneyper week, set up a banking card that is used solely for the purpose ofspending moneyon shopping. Putting a spending limit on the card also minimises the risk of you, your partner, or your kids, spending more than your budget andcash flowallows.
Set up a rainy-day fund
Even when your goals are SMART, there may be unplanned life moments that come your way. Allow room for life’s ups and downs by establishing a 'rainy-day' oremergency fund.
Bucket yoursavings goals
There are so many things to look forward to in life and you might have a handful of needs and wants that you’re working towards attaining simultaneously. In that case, it’s a good idea to divide your goals – or ‘bucket’ them – into separate areas. With a Westpac Life account you can set up to 6savings goalsin just the one account. They’re all viewable in the one screen and the savings amount, date and name can be adjusted by you at any time. Bucketing your goals helps keep track of the progress of yourpersonal financesso you can see how close you’re to achieving your goal.
It’s never too late to set a new goal
Contrary to popular belief, you don't have to wait for thenew yearto set a new goal. Now that you’re armed with the knowledge of how to set and achieve SMART goals, it’s time to start brainstorming! Where would you like to be financially in a month, year or decade? Make sure your goals are your own and not someone else’s idea of what success looks like. Choose goals that make sense for yourfinancial situationso that you stay positive and motivated to achieve them. If you’ve got the drive, the proper preparation and an action-plan, you can make progress in no time. Keep our 7 tips in mind and start achieving your SMARTfinancial goalstoday.
