Be SMART When Setting Financial Goals

2018-10-09   minute read

Lifestyle Debt

Everyone has financial dreams. Whether it's getting out of debt, building a nest egg for retirement, purchasing a home or going on vacation – visualizing any number of desired results comes naturally.

It's easy to dream. Fun even. But it's rarely rewarding because dreams don't produce results. Goals do. Yet far fewer people have financial goals. And fewer still have effectively structured goals that maximize their chances of success.  


Dreams vs. Goals

The difference between a dream and a goal is simple. Dreams fixate on an ideal outcome. Goals focus on the process, steps and sacrifices required along the way. Dreams are about achievement. Goals are about planning and execution.

An Enduring Question

At last reference, a Google search for "how to set financial goals" returns upwards of 11.7 million results. Could there possibly be 12 million different goal-setting methods? Not likely. But it's safe to say the supply of answers reflects the demand.

We live in a world of hacks and apps and shortcuts. We usually know what we want, but often don't know how to get it. We're great at dreaming, but often struggle to find the consistency, persistence and discipline that goals require.

No tool can help us find that. But there is a time-tested framework that has continuously proven effective.


The easiest way to tell if you're working with a financial goal or merely a financial dream is to test it using the acronym SMART. If you can define each of these elements within the framework of your goal, you know you're on the right track.

S = Specific: Be as clear and precise as possible about what you want to achieve.
M = Measurable: Structure your goal in a manner that allows you to track progress over time.   
A = Attainable: Be realistic about what you want to achieve given your resources (e.g. time, income).
R = Relevant: Your goal must be enough of a priority that you'll make sacrifices to achieve it.
T = Tentative: Life happens. Your goal needs to be flexible enough to weather unexpected challenges.

Write it Down

Have a goal in mind? Great! Write it down. A recent study on goal setting demonstrated people are 42 percent more likely to achieve your goals when they write them out. Once the idea is committed to paper, it's real, visible and concrete. You can also post it somewhere you'll frequently see it and reference it often to keep it fresh in your mind.

Of course, writing it down isn't enough. That's where SMART can help bring your goals to life. Let's illustrate this using a trip to Las Vegas as an example.


Do a brain dump of all the available information you have about your goal. Some questions you'll want to answer include:

Q: What do you want to achieve? A: Four-day trip to Las Vegas for two people
Q: What are the costs involved?

A: Grand total – $3,150.00


Flight and accommodations – $1,350
Meals/groceries – $800.00 ($200.00/day)
Spending – $400.00 (100.00/day)

Entertainment – $200.00
Miscellaneous – $400.00

Q: What is my timeline? A: Eight months

Now, rather than saying "My goal is to go to Las Vegas," you can say something like, "I want to save $3,150 to take a four-day trip to Las Vegas with my spouse in eight months."


Next you need to calculate your monthly or semi-monthly contributions and decide how you'll monitor your progress.

For the first part, divide the cost of your vacation ($3,150.00) by the number of months to save (8). This tells you that you need to set aside $393.75 per month (or $196.88 every paycheque) between now and when you want to leave.

Does this fit within your budget without sacrificing your needs and debt repayment? If so, great! Now you can create a spreadsheet, write a journal or download an app to provide a visual representation of how your vacation fund is growing over the next few months.

If not, the next step may help.


Anything you put your mind to is attainable, it just might not be attainable right this moment.  Avoid setting a goal so far out of reach right now, it stops you from even trying to achieve it.  

Let's say your monthly budget won't accommodate the amount you came up with. How can you make this vacation goal attainable?

Add time: If saving for your trip in eight months time is not realistic, what is? Add more time until the savings amount is attainable. For instance, an additional six months reduces your monthly contribution to only $225.00. 

Reduce Vacation Costs: You could still take an incredible vacation with a little compromise. Let's say you'd planned for a four-night stay at the Bellagio. Opting for a less expensive hotel could save you $100.00 per month.


Any goal requires sacrifice. You could spend that $393.75 per month on a lot of things – emergency savings, a down payment on a house, debt repayment, new clothes. You're giving up a lot to take this trip to Las Vegas. You need to feel inspired or it's not going to work.

This is especially true for any joint goals such as those between you and a spouse or your entire family.

For example, you and your spouse want to experience the night life in Vegas, but your children want to go to Disneyland. It's safe to assume the kids won't respond favourably to cutting the monthly movie budget so Mom and Dad can have their vacation. However, if you frame the choice between seeing the new Cars movie or seeing the actual Cars in Radiator Springs at Disney, their outlook might change.


Tentative doesn't mean you're unsure of the goal or you won't stick to it. It just means life happens and you'll need to be flexible. Unexpected expenses pop up. Your car might break down. You could lose a filling. Or your kids may get sick, requiring you to miss a day of work and pay.

When these things happen, it's possible you'll need to use your monthly vacation savings to cover the costs. Contingency planning will help offset the effects of worst-case scenarios. Here are two strategies to help you stay on track:

Increase your income or reduce your expenses: Could you work an extra shift or take on some overtime to make up the difference? Could you give up something this month (e.g. eating out) to offset the added cost? Could you negotiate a payment plan with your dentist or the mechanic? 

Adjust your travel date: If unexpected expenses have put you behind a month or two, push your trip back a few months. If you haven't booked it yet, you'll have the freedom to do so. 

Practice Makes Perfect

Can you see yourself reaching your goals using this framework? No matter what you want to achieve, using the SMART principle will help you get there faster and more consistently. The more you use it, the more effective you will be in reaching your goals and achieving your dreams. And, frankly, it's a lot better than sifting through 12 million online resources to find the "perfect" tool for you. 

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