December is usually the month when we make the New Year’s resolutions. We reflect on the past year and visualize the new one that is coming. However, how many of us pay attention to our finances? How many goals do we set regarding our financial literacy and goals? Self-care, work-life balance, and traveling goals are so important, but we tend to neglect the most important factor that defines, to a great extent, the above: our finances.

The beginning of the year is the ideal season to reevaluate our financial situation, review our finances, and set new financial goals. Now it’s the time to decide your priorities, where you want to spend money, and how your savings account is moving forward. 

Setting clear and achievable financial goals is a fundamental step on the path to financial fitness. SMART goals are specific, measurable, achievable, relevant, and time-bound. The SMART goal-setting framework is effective because it provides a structured and focused approach to achieving your objectives. By defining your goals precisely, you eliminate ambiguity and understand exactly what you aim for. This prevents wasted effort and keeps you on track. Also, with every goal we set, we need motivation to achieve; so having quantifiable metrics allows you to track progress, identify areas for improvement, and celebrate milestones, provides motivation and a sense of accomplishment.

Creating SMART goals needs patience, reflection, and time. Especially when it comes to our finances, it’s crucial to set goals that can lead to financial success and help us organize our finances effectively. Our financial gals explained to us how to set our SMART goals successfully. The SMART framework is as follows, and you can always use it for your goals in general.

1. Specific (S):

Your financial goals should be well-defined and specific so you must be clear about what you want to accomplish. In order to define your financial goals, ask yourself questions like:

• What exactly do I want to achieve with my finances?

• Why is this goal important to me?

• What is the purpose or objective behind this goal?

For instance, instead of a vague goal like "I need  to save money this year," a specific goal could be "I want to save $5,000 for a down payment on a home in the next two years."

2. Measurable (M):

Your financial goals should be quantifiable so that you are able to track your progress and determine when you've achieved the goal. The questions below will help you measure your goals.

• How will I measure my progress?

• How much do I need to save or invest?

• What are the specific numbers associated with this goal?

Instead of a vague statement like "This year, I will reduce debt," a measurable goal could be "I will pay off $10,000 in credit card debt within 12 months."

3. Achievable (A):

Sometimes, the goals we set are unrealistic and, hence, not attainable. While it never hurts to dream big, your goals should remain within reach. For instance, the questions below will hepl you identify whether your goal is realistic and achievable.

• Is this goal possible, given my current financial situation?

• Do I have the necessary resources and skills to achieve this goal?

• What are the steps I need to take to reach this goal?

If your income is $40,000 per year, setting a goal to save $1 million in one year is not realistically achievable –unless you win the lottery. You could try a more attainable goal: saving $10,000 or 25% of your income over a year.

4. Relevant ( R):

Your financial goals should reflect your life, values, and long-term objectives. They should align with your overall financial plan and make sense in your unique circumstances. The questions to better understand how relevant your goals are as follows:

• Does this goal support my financial well-being or my long-term plans?

• Is it the right time in my life to pursue this goal?

• Will achieving this goal have a meaningful impact on my life?

If you're thinking of purchasing a house, a relevant goal might be to maximize contributions to your savings accounts to secure a downpayment rather than focusing on saving for a renovation to your current home.

5. Time-Bound (T):

Finally, your financial goals should have a specific timeframe or deadline for completion.  Setting deadlines creates a sense of urgency and helps you prioritize tasks. It also provides a clear framework for planning and executing your plan. The questions below will help you set concrete and realistic deadlines in order to achieve your goals.

• By when do I want to achieve this goal?

• What is the exact deadline for reaching this objective?

• How can I break this goal into smaller, time-bound milestones?

Instead of saying you want to "I want to put money aside for a big trip," a time-bound goal could be, "I will contribute $500 per month to my savings account for the next 6 months to be able to buy the ticket to [insert ideal destination]."

If you feel like you need to be more financially literate, download our free ebook, written by our financial experts, which will give you a comprehensive overview of financial literacy and how to organize your finances thoroughly.