In tough economic times, young families may need to make changes in their finances. Our last blog talked about some ways to do that. This blog will explain how to implement SMART goals to improve your finances.

SMART goals are specific, measurable, achievable, relevant, and time-bound goals that can help you achieve your financial objectives. Here’s what each of these terms means:

    Specific: A specific goal is clear and well-defined. It answers the questions “what,” “why,” and “how.” For example, “I want to save $10,000 for a down payment on a house” is a specific goal.

    Measurable: A measurable goal has a specific number or target that you can track over time. In the example above, the goal is to save $10,000, which is a specific and measurable target.

    Achievable: An achievable goal is one that you can realistically achieve given your current resources and circumstances. For example, saving $10,000 in one year may be achievable if you have a steady income and you’re able to cut expenses and increase your savings.

    Relevant: A relevant goal is one that aligns with your values and long-term objectives. For example, if you want to be financially independent and own your own home, saving for a down payment on a house would be a relevant goal.

    Time-bound: A time-bound goal has a specific deadline. This helps to create a sense of urgency and helps you stay on track. In the example above, the goal is to save $10,000 in one year, which is a time-bound goal.

Let’s bring this down to a more common goal given the state of the economy. Let’s say we want to pay off a credit card.

    Specific: A specific goal is clear and well-defined. It answers the questions “what,” “why,” and “how.” For example, “I want to pay off the $2,000 balance on my credit card in six months so I can move that payment over to my car payment.

    Measurable: A measurable goal has a specific number or target that you can track over time. In the example above, the goal is to pay off $2,000 in credit card debt, which is a specific and measurable target.

    Achievable: An achievable goal is one that you can realistically achieve given your current resources and circumstances. For example, paying off a $2,000 credit card balance in six months may be achievable if you have a steady income and you’re able to cut expenses and increase your income.  The balance divided by 6 is $333.33. As long as no more items are charged, it will be close to being paid off in six months. However, interest will accrue each month until it is paid, so you might want to slightly increase that monthly amount.

    Relevant: A relevant goal is one that aligns with your values and long-term objectives. For example, if you want to pay off your car, paying off your credit card balance to roll that payment into your car payment would be a relevant goal.

    Time-bound: A time-bound goal has a specific deadline. This helps to create a sense of urgency and helps you stay on track. In the example above, the goal is to pay down the balance of $2,000 on your credit card in six months, which is a time-bound goal.

By setting SMART goals, you can create a roadmap for achieving your financial objectives and stay motivated and focused along the way.