How to set a SMART Financial Goal

It is always a good thing if we could have goals for our personal finance. But a lot of times, many people (me included), does not know how to set our own financial goals.

Today, we would like to share how we can actually set a SMART financial goal.

The Acronym SMART actually stand for the following Specific, Measureable, Attainable, Relevant and Timebound. Let us look a bit more detail into each of them.

Specific: State exactly what you wish to buy/accomplish with the money you save.

Measurable: Indicate the exact dollar amount you need to accomplish your goal.

Attainable: Identify the steps necessary to reach your goal.

Relevant: The goal must be meaningful or you may lose motivation to stick with your plan.

Time-bound: By when do you want to meet your goal?

Now that you understand how a goal should be, you would no longer set a goal such as the following:

"I want to save a lot of money."

Instead, your goal should be something like the following:

S: I want to save for a down payment for a Honda City.

M: I plan to save RM 6,000 for the down payment.

A: I will reach my RM 6,000 goal by saving RM 250 from my monthly paycheck.

R: The commute to work takes more than 2 hours each way. Using a car, I can reduce the commute time to 1 hour only.

T: By saving RM 250 a month, I will save RM 6,000 in 20 months, or 2 years.

The SMART Financial Goal will be as follow:

“I plan to save RM 6,000 for a down payment on a new Honda City by saving RM 250 from each monthly paycheck for 2 years.”

Be sure to record your monthly savings for your SMART goals on your spending plan spreadsheet.