Why it’s Important to Set Financial Goals
June 30, 2023
It’s important to set goals for anything we want to succeed at, and your personal finances are no exception. We’ve all heard of “SMART” goals…specific, measurable, achievable, relevant, time-based. Every goal should have those elements. It sounds cliche, but it’s true. It’s important to set financial goals because if you don’t, you won’t know whether you’re having “success”, however you define success.
Here’s an example of a SMART financial goal:
“I want to contribute $500 per month to a brokerage account in 2023.”
Specific:
This goal is specific. There’s no room for interpretation or deviation. A specific dollar amount, at a specific frequency, for a specific amount of time.
Measurable:
We love data as Daily Money Managers! Analyzing data is our way of measuring success. This goal is easily measurable. “How many months did I successfully set aside $500 this year?” I always find that automating savings is the best way to go. In the case of the goal above, you can easily log into your brokerage and set up an automated monthly transfer from your checking account into your brokerage account. You can always skip a transfer if you’re tight on funds one month.
Achievable:
Set the dollar amount as a “stretch”, but something that you can feasibly do. You don’t want to overextend yourself and set yourself up for failure. Make it a meaningful goal that’s still achievable.
Relevant:
This goal is totally relevant to your financial goals. Enough said!
Time-based:
Notice how the goal is set for 2023. Not in perpetuity. You can always set another identical goal for next year. This way, after 12 months we can look back, analyze, measure and determine our success rate. It motivates us to keep going and create more financial goals.
In conclusion, it’s important to set financial goals because if you don’t have goals, then you can’t achieve them!
Side note: The type of account you choose for your savings is very dependent on your specific stage of your personal finance journey. I love this post by Personal Finance Club because it really simplifies which accounts you should funding and in what order!