Before you can create a spending and saving plan, you need to set financial goals. Goals reflect your values and provide direction for planning. Setting goals will help you balance your needs and wants.
Specific
A goal that is specific has a much greater chance of being accomplished than a general goal. Instead of “I am going to save more money,” try “I am going to save $3,000 over 12 months.”
Measurable
You will need to measure and monitor your progress to see how close you are to your goal. The key is to ask, “How will I know when my goal has been accomplished?”
Achievable
Trying to tackle too much at once will result in failure, and cause you to give up.
Do some research. If you find your goal unrealistic, consider lowering the target number or extending your time frame.
Relevant
Be sure your goal is the best use of your time and resources.
Ask yourself, “How important is my goal in the scheme of things?”
Time Bound
Without a time frame, it is easy to let your goals drift away or get frustrated when a setback arises.
Turning Goals into SMART Goals
Making multiple changes at once can feel overwhelming. Stick to your plan by focusing on one SMART goal at a time.
Paying off debt
Having a goal to pay off debt is a good one, but accomplishing it without being more specific will be difficult. Here is a SMART way to create the goal:
Specific
“I will pay off all of my credit card debt.”
Measurable
“I will pay my credit card debt down to $0 from the current balance of $10,000.”
Achievable
“Yes, this is an attainable goal. I am able to put $300 per month toward this goal.”
Relevant
“Paying off my debt is important to me. Being debt free will help reduce my stress.”
Time Bound
“I will pay off my debt within three years.”
Emergency fund
You should have at least three to six months worth of expenses saved in order to cover the financial surprises life throws your way. Here is an example of how to get started:
Specific
“I will put money in a savings account for emergencies.”
Measurable
“I will set aside $10,000 in my emergency fund.”
Achievable
“Yes, this is an attainable goal. I will start by saving $2,000 over the next two years and increasing my savings amount each year after.”
Relevant
“Having an emergency fund will prevent me from needing to fall back into debt when the unexpected happens.”
Time Bound
“I will reach my goal in the next five years by saving $1,000 in years one and two, $2,000 in year three and $3,000 in years four and five.”
Saving for items
Not all items in your budget will occur monthly. It is a good idea to incorporate periodic expenses, such as holiday gifts and vacations, into your monthly spending plan:
Specific
“I will set aside money for Christmas gifts each month.”
Measurable
“I will set aside $550 for my holiday fund.”
Achievable
“Yes, this is an attainable goal. My financial institution offers a holiday account, where I can save my funds.”
Relevant
“Saving a little each month will prevent me from overspending and going into debt around the holiday season.”
Time Bound
“I have 11 months until the holidays, so I will save $50 per month.”
Get started
Create your own SMART goals using Mountain America's budgeting form.
Download budgeting form
