Tablet and smart phone with financial planning apps open.

Make Your Financial Goals SMART and Your Savings Systematic

By Dr. Barbara O’Neill, Financial Management Specialist, Rutgers Cooperative Extension

There are several important reasons to save money, including peace of mind and to have cash available for emergencies. Another motivating factor is to have money to achieve financial goals (e.g., buying a new car).

Setting financial goals is a lot like planning your next vacation. In order to develop goals and a travel itinerary, you need to know your starting point (Point A), destination (Point B), and the time frame and cost of the “journey.”

What is your financial itinerary? Have you made specific travel plans?

Start by making your financial goals “SMART” goals. SMART is an acronym for Specific, Measurable, Attainable, Realistic, and Time-related.  In other words, financial goals should have a definite outcome and deadline and be within reach, based on your personal income and assets.

When writing a SMART goal, use this format: “I plan to [describe outcome] by [date].”

Example: “I plan to save $15,000 for a car in 5 years.”

The more specific a financial goal, the easier it is to determine how much savings is required. You simply work backwards to break a large goal into smaller pieces. 

Example: $15,000 in 5 years will require $3,000 in annual savings or about $58.00 per weekly paycheck ($3,000 divided by 52).

If this sounds too intimidating, simply write down where you are now and where you want to be later.

Example: $100 in savings account now and $1,000 in savings account later.

No matter how you write them down, goals provide a framework for investment decisions and help narrow down your choices. For example, if you have a short-term goal, like freshman year college tuition in a year or a new car purchase in three years, you’ll want to keep this money liquid so that there’s no loss of principal. 

On the other hand, if you have a long-term goal, like college expenses for a newborn or retirement in twenty years, cash assets are a poor choice due to the risk of loss of purchasing power. Over long time frames, stocks provide the best historical return of any investment type.

A financial goal everyone should have is to build an adequate emergency fund. This is savings set aside to cover unanticipated bills or monthly living expenses if paychecks stop (e.g., unemployment). Too often people use credit or borrow from family members in an emergency because they lack a savings account to fall back on.

Make establishing an emergency fund a priority. Fund it with three to six months of living expenses or whatever amount provides peace of mind. When you withdraw money from this account, pay yourself back on a systematic schedule. Discipline yourself to use emergency fund money only for real emergencies (e.g., car repairs).

Follow this advice from America Saves: “Set a Goal. Make a Plan. Save Automatically.” 

As the soundbite indicates, setting goals is just a starting point. To turn goals into action requires habits (e.g., save $100 monthly) or, better still, systems (e.g., make automated savings deposits via payroll deduction or checking to savings account transfers).Habits are ingrained behaviors that people do without thinking and systems are processes that people follow. Both habits and systems are repeatable and foster a sense of personal control.

A key to savings success is goal-setting. Remember, people don’t plan to fail, they fail to plan.


Are you trying to save money? Let Military Saves help you reach your savings and debt reduction goals. It all starts when you make a commitment to yourself to save. We'll keep you motivated with information, advice, tips, and reminders to help you reach your savings goal. Think of us as your own personal support system.

TAKE THE PLEDGE


@moneytalk1 shares how making SMART goals and automating your savings can drastically improve your ability to reach your financial goals >> http://bit.ly/2sVXBOJ @MilitarySaves

Tweet this now

Tip of the Day

  • Written by Guest Blogger | May 5, 2014

    Know how to request a free copy of your #credit report. It’s easy and safe. Just go to www.annualcreditreport.com

Saver Stories View all »

Setting a Goal Leads to Success

Written by Super User | May 24, 2019

Growing up, Marisa’s dad had always talked about saving first, but she said she didn’t really internalize it until much later. “I was drifting along with no plan, carrying a little bit of revolving debt, saving some money here and there, but without a real plan for it.”

Read more...

Money on the Side

Written by Super User | November 26, 2010

Camp Arifjan, Kuwait -- A colonel in the 1st Theater Sustainment Command has money on his mind.

Army Col. George Fields, the Chief of Intelligence, or G2, has been teaching a free "Managing Your Money" class here in his spare time. More than 400 students have attended his six week-long class to learn more about increasing their own finances.

"All I did was sit down and listen to a guy one day who showed me what he was doing" said the colonel as he explained how he became interested in what he calls, "becoming financially free."

Read more...

A Disciplined Approach to Saving

Written by Super User | November 26, 2010

I just recently retired after 30 years of service with the Marine Corps. I truly enjoyed my time serving the Corps and I flourished in the disciplined environment. I also took a disciplined approach to saving. Here are some of the tactics I used-they are very low to moderate risk.

Read more...