How to Set S.M.A.R.T Financial Goals
Sep 20, 2011

Author: PersonalFN Content & Research Team

We all have financial goals - even if we don't really think of them as goals per se.
For example, you might want to buy a new cell phone, or a new car. You might want to take a family vacation next year, or renovate your home.
Some people prefer to keep it simple when they think of goals.
They want to become rich. That's it, in a nutshell.
If you think about it, being wealthy, or wealthier than you are today, would enable you to do all those other things easily.

So, would you say that becoming wealthy is your main financial goal?

If your main financial goal is to become rich, studies show that most likely, you won't achieve it.
Why is this? Because as goals go, 'becoming rich' is not a S.M.A.R.T. financial goal.
Let's see what this means.

  1. Is it Specific?

    'Becoming rich' isn't a goal. It's a desire, or a wish.
    For a goal to be powerful, and more importantly, achievable, it needs to have certain characteristics. For starters, it should be Specific.

    The "W" questions will help you be specific when you set your goals.
    1. Who is the goal for?
    2. Why do you want to achieve this goal i.e. benefits, reasons, purpose behind the goal?
    3. What do you want to achieve exactly?
    4. When will the goal occur?
    5. Which are the requirements and constraints?

    For example, a vague goal would be 'Become rich'.
    A specific goal would be 'Increase investments by Rs. 50,000 p.m. to have a portfolio of Rs. 2 crore within 15 years'.
  2. Is it Measurable?

    When you set a goal, and you start working towards achieving it, it'll always make you feel good to see how much you've accomplished. If you set a target and have a time-line, you'll be able to monitor your progress and give yourself a pat on the back at every milestone passed. With every piece of your goal successfully achieved, you'll be spurred on to do even better.

    Think of it this way: you wouldn't go on a vacation without planning ahead and having a to-do list. You'd check items off the list one by one once they were finished. So adopt the same approach with achieving your financial goals.
    Suppose you are saving up for a family vacation, and you figured that you need to save Rs. 10,000 per month for 12 months to go on that vacation next September. Your goal is measurable. Each month you will be able to see what you have saved, whether you need to increase your savings, or you can relax a bit and treat yourself for extra savings done ahead of time.
  3. Just remember, the more specific the goal, the easier it is to measure.

  5. Is it Adjustable?

    Often people make the mistake of setting goals that are too rigid, where any unforeseen event can throw the goal off course and destroy the goal achiever's motivation to keep going. This is a mistake. And also, simply unnecessary.

    Goals are not meant to be win or lose situations. Goals are just goals. You can achieve them 100%, or 85% or 50%. You can achieve them early, or late, or if things go exactly according to plan - right on time.

    The main thing to remember is that you are working towards something, and other things can get in the way, or can help you along, and you needn't stress about it.

    For example, you might have started saving for your retirement, when a recession hit and you lost your job. This has caused you to deplete your contingency reserve and dip into your retirement funds to meet expenses until you get another job. This is obviously not ideal, but worrying about not achieving your retirement goal on time will get you nowhere. When you get another job, you will build up your retirement savings again. You may need to adjust your retirement goal corpus or time-line, but that's alright because your goal is adjustable, as all goals should be.
  6. Is it Realistic?

    If you ask a 5 year old what they want to be when they grow up, you'll get a response like 'an astronaut', or 'a princess'. If you ask a 10 year old, you might hear 'a doctor', or 'an engineer'. As a 30 year old, you might still harbor a secret wish to walk on the moon, but this is not very realistic.

    We're an achieving generation. We want to take care of our families, to do well in our careers, to have fun, to travel. We want to buy the new car, wear the new watch, check out the new holiday destination.

    But while we can be specific about all these things, and make them all measurable and adjustable, is it realistic to say you want to achieve all this and then some?

    Let your list of financial goals be realistic. If you set up a financial goal list that is basically a list of all your heart's desires, you might be disappointed if things don't seem achievable.

    Have your priorities, know your capabilities, and stretch yourself a little bit to get that extra edge.
    But remember, don't take risks where you can't afford to, and don't set yourself up for disappointment. And most importantly remember that money is a means to an end, not an end in itself.
  7. Is it Time-based?

    Setting a specific, adjustable, realistic goal is great, but without a time-line, it can be difficult to measure. Saying "I want to buy a new car" is not really time-based.
    Saying "I want to buy a new car worth Rs. 6 lakhs in 18 months" is time based and much more measurable. Figuring out how much to save each month and how much of a loan you'll need becomes a simple math problem, and the likelihood of buying your new car in 18 months goes up drastically.
    With no time frame, there's no sense of urgency, or yardstick to measure your progress.



The process of setting your goals is an exercise that will give you incredible insight into yourself and the things you value. You'll be able to see your aspirations take shape, become specific intentions that you will be able to take steps towards. Setting S.M.A.R.T goals will help you distinguish real wants and needs from daydreams.

Goals can act like a map and like a conscience. The next time you're in a technology store or a clothes boutique considering that purchase, you'll think of whether this fits in with your savings plan for the month, and whether it brings your goal closer or not. You can then make your decision with full financial awareness.

Add Comments

Dec 23, 2018

I am waiting my results and your response is very well done but I'm sure it is a truly great way
Dec 23, 2018

I am waiting my results and your response is very well done but I'm sure it is a truly great way

Feb 06, 2013

To achieve the goal, following points to be borne in mind:
1.  Invest regularly (e.g., SIPs or RDs)
2.  Don't be greedy
3.  Don't be swayed by market fluctuations
4.  Be patient
5.  Don't change your plan on advice of others
Feb 06, 2013


Seen your email and wish to state the following:

Instead of setting the Goal as "Becoming Rich", we

can set the Goal to get "Financial Freedom". My thinking is that people who are working for others or having a small business cannot have Financial Freedom so easily.

If you want to get Financial Freedom, you should be either a Great Businessman or a Smart Investor.  Then only you can become Rich and also have Financial Freedom.Then only your money will work hard for you; otherwise, you have to work hard for money till your death. Pl. also note that Saving is different from Investment.

Nov 03, 2011

Crated the greatest articles, you have.
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