How to use the SMART approach to setting your financial goals
Setting yourself regular financial goals is an integral part of your journey towards financial freedom. One of the best ways to ensure that you are setting your financial goals in the right way is by using the SMART criteria for goal setting.
One of the best ways to achieve the level of financial freedom you desire is by setting yourself regular financial goals that will help you get there step by step. To ensure you are setting your financial goals in the right way, you should consider adopting the SMART approach.
Adopt the SMART approach to set your financial goals.
What is the SMART approach?
The SMART approach is commonly used in project management and is an acronym that stands for specific, measurable, achievable, relevant, and time-bound. It is, effectively, a system for goal setting that helps individuals set realistic and achievable goals.
In other words, any new financial goal you set yourself should contain these five criteria for you to increase the chances of achieving it.
The SMART criteria is an excellent framework for setting milestone financial goals.
How to use SMART for financial goal setting
The SMART criteria for goal setting are actually an excellent framework for setting milestone financial goals.
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Firstly, you should ensure that your next milestone financial goal, such as buying your first property, is specific and measurable. In the case of buying a property, you will have a rough idea of how much it will cost in the area you want to buy it so you know how much you will need to save to afford the deposit. This makes it specific and measurable.
Secondly, you need to make sure your financial goals are achievable. In the case of buying your first property, you should choose a property that you can realistically afford within the time frame you want to purchase it in. If you currently have zero savings but want to buy a mansion in the next three years that would be rather unrealistic but if you already have the amount you need for a deposit then you could set this financial goal for within the next three months, for example.
Thirdly, your financial goal needs to be relevant and time-bound. In the case of purchasing your first property, you will either want to make the purchase to live in or as an investment property. Both cases would be considered relevant and by pinpointing the time frame by which you will want to make your first property purchase, your financial goal will also be time-bound.
The SMART criteria can be applied to all your financial goals and are an excellent method to help you achieve them.