4 Common Financial Goals – How to Make Them SMART & Be Successful
by Carmen Chan
When you’re new to setting financial goals, you might want to see some specific examples. Here are 4 of the most common goals we hear and what to do to make them SMART. When your goals – financial or otherwise – are SMART, it’s easier to achieve them. A goal that is specific becomes measurable. Once it’s measurable, you can ensure it’s attainable and realistic. And finally, when a goal is timely you give yourself enough time to achieve it, but you’ve set a deadline to keep yourself on track and motivated.
1. If Your Goal is to Pay Off Debts
Deciding that you want to pay off debts is too broad so you’ll have to narrow down how much debt you want to tackle. If you have six cards, for example, you could isolate two and vow to wipe out the debts on both balances by 2022. Or you could tally up your total debts and decide to pay off a percentage by the end of the year. Some debts could be higher in interest, so you may want to tackle them first.
Your other option is to consolidate your debts through a balance transfer onto a single credit card, onto a line of credit or debt consolidation loan, or through a debt repayment plan arranged through the Credit Counselling Society. In all instances, your debts will merge into a single sum and you’ll only have to make one payment.
Once you’ve decided how you’ll attack your debts for the year, and that your payments fit into your budget, automate your payments.
What to Watch Out for with Debt Consolidation
2. If Your Goal is to Save Money
You could be vying for a trip to Hawaii or building an emergency fund. (There are lots of great reasons why you should have goals to save money.) Either way, you’ll need to decide how much you want to set your goal at and when you plan on crossing the finish line.
Once you have these two pieces in hand, divide the goal amount by the timeframe you’ve set for yourself. A $12,000 emergency fund by January 2021 would mean you’re aiming to save $1,000 each month, for example.
Double check that this goal fits within your budget’s constraints, then automate the savings so you don’t end up spending this money in your account. Out of sight, out of mind is a great tactic – if you pay yourself first when payday rolls around, you’ll get used to not having that money around. If the goal seems too lofty, decrease the amount or increase the timeline. Start by setting yourself up for success. You can always challenge yourself after 3 months of achieving your goal if you find that it’s too easy.
Ways to Save Money Everyone Can Do
3. If Your Goal is to Improve Your Credit Rating
If you know your credit has taken a beating and you need to improve your score, you need to zero in on why you need it to shape up and how to get there. It’s a good idea to request your own credit reports from TransUnion and Equifax for free each year to check for accuracy.
Say, you’re hoping to replace your car in October, so you need to qualify for an auto loan, or you’ll be mortgage shopping by the Spring, but you have a history of missed payments and a maxed-out credit card.
You need to outline concrete actions that’ll help you prop up your score within your designated timeframe: commit to making regular payments on your accounts, automate payments so you don’t miss due dates, or contribute hefty payments so your utilization ratio will be tamed, as examples. But it takes time and good credit behaviour to repair a credit rating so don’t fall for an offer to skip the line.
4. If Your Goal is to Learn How to Budget Your Money
Learning how to budget your money and track your spending are great habits to get into – but if you’re like many people, you don’t know where to start. Set a resolution such as, “I want to set a budget every month and track my spending” but make it a tangible goal by setting appointments in your calendar to sit down with yourself, log your income and your expenses, and build out a budget for the month ahead. If you don’t specifically earmark time for the task, it won’t get done. If you’re not sure how to allocate your money, here’s an interactive budget calculator that will help you get it done
When it comes to your tracking, set a daily alarm on your phone to remind yourself to jot down your expenses for the day. There are financial apps that can help, for example by logging your debit transactions in real time or importing your banking records into a spreadsheet. Being organized with your money and finances matters, so find a system that works for you.
When It Comes to Achieving Success with Financial Goals
Setting and achieving success with financial goals is a great way to start any new year or turn over a fresh leaf at any point in the year. If you need help, don’t be afraid to reach out to us for tangible help, guidance, or affirmation that you’ve got this. Change can be hard; go easy on yourself as you learn new money management skills and trade old habits in for new ones. The way you prepare yourself for success matters, and the date you choose to make your changes should be when the time is right for you. There are 365 first days in a year – pick the date that’s best for you!