What are SMART goals and why do they matter?

- So let's talk a little bit about SMART goals when it comes to your finances. And when I say SMART goals, I'm not just saying well-thought-out or intelligent goals, although I guess it could be that. I'm talking about the acronym, S-M-A-R-T, SMART goals. Now the S stands for specific. The M stands for measurable. A stands for achievable. R stands for realistic. And T stands for time-based. I think achievable and realistic are kind of common, but then it wouldn't be a fun acronym. It would be like SMAT goals or SMRT goals. So it's SMART goals, which is a little bit easier to remember. So what do we mean by SMART goals? So for me, it's easy to think about what it is by thinking about what it isn't. So let's think about what a non-SMART goal would be when it comes to your finances. Let's say you just said, "I want to be rich." That is not a SMART goal. That is not specific. It is not measurable. It might be achievable depending on how you think about what rich is. But once again, we don't even know 'cause you haven't quantified what that is. What does rich mean? It may be realistic, but we don't know. And the time, you haven't given any time there. So let's see if we can turn that into something more of a SMART goal. So let's first define what it means to be rich. And let's say you want, by the time you are 30 years old, so I'm putting some time in there, you wanna have enough money for a down payment on a pretty nice house. Let's say you wanna have a $100,000 down payment. So let's see if that meets our SMART goals. So is it specific? I want to save a $100,000 for a down payment on a house by the time I am 30 years old. That seems specific. It's a $100,000 for a down payment on a house. Is it measurable? Yes. You can see how much money you have saved for that down payment. How close you are? The first year, you saved $10,000, you're like, "Wow, I'm 10% of the way to my goal." The second year, I've saved $20,000, et cetera. You can measure how you're getting there. Is it achievable, realistic? Well, depending on your financial circumstances, that seems doable for a lot of folks if they're able to save well that they might be able to save that amount. But once again, it depends on your income, your lifestyle, your expenses. You have to make sure that's realistic. For some folks, that might not be achievable or realistic. For other folks, it might be very achievable and realistic. And then is it time-based? Well, yes. I just said by the time I am 30 years old. And you could break that down. Let's say you're 25 years old right now, and you say, "Well, then I'm gonna have to save $20,000 a year for the next five years." So you could break that bigger SMART goal into smaller SMART goals. "Okay, this coming year, I need to save $20,000 towards my down payment on a house." Once again, it's specific, it's measurable. Depending on your scenario, it may or may not be achievable if that $20,000 a year is just way too much. If you're making, let's say, $40,000 a year, you might say, "Okay, that's still not a SMART goal." It's not necessarily achievable or realistic. Maybe you have to moderate that a little bit. Bring it down to five or $10,000. In which case, maybe your larger goal, you're gonna save $50,000 by the time you're 30. Or you'll say, I have to raise a 100,000 by the time I'm 35. What SMART goals allow you to do is just one, realize whether you are achieving them and also have goals that are achievable in a very clear timeframe. So SMART goals are useful in practically anything you do, but especially when it comes to your finances because it's very easy to say, "Oh, well, I just wanna do that. I wanna be comfortable. I wanna have enough money. I wanna to be rich." Whatever you say. But when you just say it in these kind of loosey goosey terms, it's very hard to know whether you're making progress against those things. And because it's hard to know whether you're making progress, you oftentimes aren't holding yourself accountable. And so SMART goals, they're a smart thing to do.