How to Use SMART Goals to Achieve Financial Freedom
Achieving financial freedom is a great long-term goal. I mean, who doesn’t want to spend their days lying on a beach sipping mai tais?
OK, so it’s not all quite like that. But financial freedom gives you the ability to create the life you want, regardless of what’s going on in the world. That level of independence is amazing.
But how do you go from daydreaming about financial independence to actually setting a plan in motion to achieve it?
By using SMART goals.
What Is a SMART Goal?
SMART goals are goals that are:
SMART goals are the building blocks of financial freedom. They allow you to create an action plan for turning your dreams into reality and setting yourself up for future financial success.
How to Set a SMART Goal
To set a SMART goal, you’ll want to spend some time dreaming. What is it in life that you really want but think you won’t get? Maybe it’s a vacation to France or a Civic Touring Type R with red suede seats.
Maybe it’s the ability to quit your job and pursue entrepreneurship.
Regardless of your objective, write it down. Then break it down into measurable goals. For this process, it’s helpful to use a SMART goals template, even if it’s just each category spaced out on a page of notebook paper.
For the purpose of this article, let’s say you’re trying to save money. While that’s an admirable idea, saying you want to save money isn’t giving you something to work toward.
You need a specific goal, like saving $10,000 for an emergency fund.
Ask yourself what, why, who, where, and which questions to ensure that your goal is clear. The more questions you ask yourself to hone in on your goal, the better you’ll be able to fill out the rest of the steps.
When creating specific SMART goals, we can ask:
- What do I want to accomplish? This question helps you set SMART goals because you’re able to tell yourself exactly what you want to accomplish.
- Why is this goal important? Answering this gives you something to care about and work toward.
- Who is involved? Asking yourself this is important. If you’re coupled, you’ll need to get your partner onboard. And if you’re single, you might want to tell a friend about your plans to give yourself some accountability.
- Where is it located? This won’t apply to every goal. But some goals might involve a location, such as moving to Hawaii.
- Which resources or limits are involved? This question is important because it allows you to use the SMART method and give yourself a specific objective.
Making sure you can measure your progress is important. In fact, it’s probably the most important part of setting a SMART goal.
That’s because being able to measure your success — with a chart, graph, etc. — is the best way to ensure that you’re on the right track.
You can also use measurable goals to celebrate small wins along the way. Reward yourself to stay motivated and mark your progress. For example, for a big goal like saving $10,000, you could treat yourself to a one-person ice cream party every time you put $2,000 in the bank.
Here are some questions you can ask yourself when determining if your goal is measurable:
- How much? Asking yourself how much is important to the goal-setting process because it gives you a number to aim for.
- How will I know when it is accomplished? Feel free to be a little cheeky with this, but still give yourself an answer as part of creating an attainable goal. For example, I’ll know when you see that sweet, sweet $10,000 number sitting in my bank account.
Ensuring you set attainable SMART goals will keep you motivated to complete them. While it might be wonderful to dream about saving $1 million in two years and traveling to Bali to ride the elephants, if you’re making $30,000 a year, that’s not going to be feasible.
Instead, look at what you can accomplish reasonably. This is important because, if your goal is attainable, you won’t get discouraged.
The goal of using the SMART acronym when planning your next financial steps is to achieve milestones as they come your way.
You’ll want to answer questions like:
- How can I accomplish this goal? This is where you get into the nitty gritty of the goal-setting process. You want to create a roadmap to your goal that lets you know exactly where you’re headed. For example, you can accomplish your $10,000 goal by saving $415 a month for two years.
- How realistic is this goal? For money goals, this is a good place to check in with your budget and ensure that $415 a month fits. If it doesn’t, consider extending your timeline or increasing your income to make the goal work. If you can’t figure out how to make your goal realistic, you might want to consider starting over with a smaller goal, like saving $5,000.
Relevant goals get completed. If they’re not relevant, you’re simply not going to achieve them. That’s simply because of the way our brains work with money — and goals in general. If you can’t make yourself care about your goal — no matter how badly you want to change your behaviors — you’re not going to be able to.
That’s why you need to ask yourself if it’s a relevant goal. Ask these questions:
- Does this seem worthwhile? You’ll want to ensure that this goal aligns with your values. In our example, yes, saving $10,000 seems worthwhile because it will take away the financial stress you’ve been feeling. You want to be at a place where you can start pursuing financial independence, and this will be the first step to get you there.
- Is this the right time? It’s also important to make sure now is the right time to be pursuing your goal. If you’re being hounded by creditors, it might not be the right time to save $10,000. Maybe you should save a month’s worth of expenses and then make paying off your credit cards your next goal.
- Does this match my other efforts or needs? This is another important question to ask yourself. If you’re saving for a house and building your retirement savings, it might not be feasible to set aside $415 a month.
Finally, you want to make sure that your goals are time-bound. This is increasingly important to accomplishing your goal. If you don’t give yourself a timeline, you might come up with excuses not to meet it. Restricting yourself to a set time encourages you to reach your goal instead of avoiding it.
You’ll want to ask the following questions:
- When will I complete this? Having a concrete timeline will help you. If you’re trying to save $10,000 in two years, you know you have 24 months to make $415 payments to yourself. You can create a graph to help you track your progress and gamify your progress, if that helps you stay motivated.
- What can I do today? You also want to set yourself up for success. Maybe you need to set up a separate savings account so you don’t spend your money. Maybe you need to find a side hustle to create extra income. No matter what you need to do, you’ll want to make a checklist to ensure you’re setting yourself up for success.
- What can I do six weeks from now? Again, check in with yourself at specific milestones to ensure you’re actually set up for success. The first six weeks are important, because it’s easy to say you’re going to do something but then never follow through. Pro tip: Set up a reminder on your phone to check in with your progress in six weeks.
- What can I do six months from now? Six months in you should be making good progress on your goal. If you’re not, you need to ask yourself why. Is your goal not relevant? Is it not attainable? It’s OK to change your goals so that they fit your needs. This gives you space to fix whatever isn’t working.
Putting Your SMART Goal Together
At the end of this process, you should have a very well-thought-out goal that is accomplishable in a reasonable timeframe.
In order not to forget it, it’s helpful to post your goal somewhere you see every day. If you have a vision board, that’s a great place to put it. Or you can always stick it on your refrigerator.
Do whatever is going to help you keep that goal in the forefront of your mind — that’s the most important part.
It can also be helpful to tell a close friend what your plans are and to ask them to check in with you. Saying things out loud to someone else sets in motion a different kind of energy and adds a level of external accountability. After all, it’s embarrassing to say that you’re going to hit a goal and then slack off.
And it’s OK to use that external motivation of pride to push you to do something that will help you out financially.
Stacking SMART Goals to Reach Financial Independence
Once you’ve hit your first realistic goal, it’s important that you don’t stop.
Stacking SMART goals allows you to build a whole list of goals that will ultimately get you to financial freedom.
On its own, financial freedom is overwhelming. For some people, that could mean saving $3 million to $5 million. That’s a huge amount of money.
Start with a $10,000 emergency fund. After that, try saving your first $100,000. Soon enough, you’ll be in a place where your money starts working for you and you don’t have to work as hard to meet your goals.
That’s the trick to achieving financial independence — giving yourself small building blocks to grow your wealth.