SMART Money Goals Retooled

Does your New Year’s resolution list include improving your personal finances? If so, you’re not alone! Traditionally, goal-setting gurus assert that “SMART” goals are more likely to be achieved.

SMART is an acronym that stands for Specific, Measurable, Actionable, Realistic, and Timebound.

But over the past year, I’ve realized there’s a problem with SMART goals, especially when it pertains to money. I’m not saying we should throw the entire formula in the trash. By making some tweaks to this classic model, you’ll increase the chances of achieving your personal finance goals… and have fun in the process.

SMART Money Goals Retooled

S - Specific

Being specific about your money goals is good, just not too specific. For example, a goal of “$10,000 in my savings account,” is better than a goal of “A lot of money in the bank.” Defining your target helps you know when you’ve hit the mark. You’re certain that you’ve achieved your goal when you see a balance of $10k or more in your savings account.

Let’s say you made a super specific money goal like “$10,000 in my savings account as a result of my side hustle income.” Why is this a problem? Because you’re being too specific about how the goal is going to happen. There are plenty of ways you could accomplish the goal of $10k in savings: getting a raise or bonus at work, receiving a gift or inheritance, a surprise tax refund, a lottery win, or an investment that takes off.

If you receive $10k as a gift, you technically haven’t achieved the goal of “$10,000 in my savings account as a result of my side hustle income.” It might make it feel as though it doesn’t count because you were gifted the money, and you didn’t work for it.

The tweak: Define the financial result you want, and leave “the how” open for possibilities.

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M – Measurable

Measuring helps us to gauge our progress on our money goals. What’s the problem with that? Money doesn’t always behave in predictable patterns and straight lines. If we measure something today, it might look like a failure. If we measure it next month, we see exponential growth.

Have you heard the story of how Chinese bamboo grows? Once planted, it must be watered and fertilized consistently. There’s very little growth for five years. Then suddenly, the bamboo grows up to 90 feet tall in five weeks! It's important to note that the bamboo didn't achieve this in 5 weeks; it actually took 5 years.

Some financial goals, like small business growth and investment performance, can be like bamboo. You invest attention and resources over a long period of time. It seems to take forever to see results. But all of a sudden, it’s an “overnight success.” Sure, some money goals show steady progress month after month, but not all of them.

The tweak: Remember that some money goals take longer to come to fruition than others. Don’t give up before your “bamboo” shoots up exponentially!

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A - Actionable

Action is amazing and it’s certainly a key component to achieving your financial goals. But not just any action will do! It needs to be aligned action, not action for the sake of being busy. What’s aligned action? It’s the next step that actually gets you closer to your money goal. Sometimes those steps can feel scary because they’re outside of your comfort zone, like hiring a business or financial coach . If you experience a mix of fear and excitement, you’re probably on the right track!

The other issue I see with my clients is they become so committed to a course of action that they’re not open to suggestions. If you think there’s only one way to pay off debt, grow your retirement assets, or make sales in your business, you might miss out on golden opportunities.

The tweak: Make your plan of aligned action AND be open to suggestions and opportunities!

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R – Realistic

I probably dislike the R in SMART goals the most! When someone says to me, “Be realistic!” it feels like they’ve thrown a wet blanket over my head. And really, what does “realistic” even mean? It’s subjective, based on each person’s experience. I prefer to make 3 levels of money goals: good, better, and best (a.k.a. holy moly goals)!

Let’s use annual income as an example. Based on my current income and the patterns I’ve observed, it’s easy to come up with a good, predictable income goal for next year. It’s based on the facts and, barring some unforeseen financial disaster, is extremely likely to happen. 95% of this goal is under my direct control.

If I factor in business deals on the horizon, collaborations, and opportunities, I come up with a better and higher income goal. This goal is possible, but not entirely dependent on factors under my control. The best and highest (holy moly) version of this goal is crazy good and honestly, I have no idea how it’s going to happen. That’s okay! The purpose of the “holy moly” money goal is to inspire me and stretch my vision.

The tweak: Ditch “realistic” money goals for ones that are Good/Better/Best!

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T – Timebound

The purpose of putting a timeline to your money goals is to prevent procrastination. There’s nothing like a looming deadline to light a fire under your tooshie to get you motivated. However, there is a dark side to time deadlines when it comes to money goals. They create an arbitrary line in the sand that defines success and “failure.”

Let’s say it’s your goal to achieve a $10,000 month in your coaching business. You’re super excited because it’s the 25th of the month, and you’re so close at $9,500. But for the next five days, you have only $400 in sales, and finish the month at $9,900. The coveted $10k month has eluded you again! But has it? A calendar month is just an arbitrary label we’ve slapped on a series of 30ish days. You might find that you actually did achieve $10k in 30 days, from the 26th of the previous month to the 25th of this month! And even if you didn’t, is a $9,900 month really a failure?

My husband and I set an ambitious goal when we bought our house. Although we financed it with a 30-year mortgage, we set the intention to pay it off in 15 years. We bought the house in April 2004 and made our final payment in February 2021. Did we fail at our goal because it took us 17 years to pay off our house instead of 15? Absolutely not!

There are some financial goals you must be committed to UNTIL they are accomplished. How silly would it have been if we threw up our hands in April of 2019 and said, “Oh well! We failed our goal to pay off the house in 15 years. Boy, do we suck!”??

The tweak: Use time as motivation, not as a weapon to punish yourself.

So now you know the problem with SMART money goals and the solution. Use the tweaks you discovered here to create motivating and exciting financial goals for the New Year!

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