Is Your Financial Goal SMART?

Having SMART Financial Goal will help you in understanding what you need to achieve, when and Where to invest and how much you need to achieve the life goal.

SMART (Specific, Measureable, Attainable, Realistic and Time Bound) Financial goals are Specific future need that requires Specific sum of money at the Specific Period. Financial goal must have all the three aspects.

Example: Down payment for car requires sum of Rs 2 Lakhs after a year.

Specific Goals: – Your goal should be specific and it is the first and important element of the goal. Make sure your goals are not generic but more specific.

Example:

I should become rich – General Goal.

I need to invest Rs 12,000 per month to have retirement corpus of Rs 1.00 Cr after 30 years. That makes me rich – Specific Goal

Measurable Goals: Your goal should have a target so that it can be measured. Measureable goals are more successful in nature. When you set a goal and start working to achieve it, It should have specific target to monitor your progress.

Example:

I need Rs 2, 50,000 for family vacation in 12 months – Specific Goal

You require Rs 2, 50,000 for family vacation in a year time. So you need to save Rs 20000 per month for 12 months to achieve the goal. Your goal is measureable in terms of money and time.

Attainable Goals: Your goals should be achievable and goals should be aligned with your income and expenses. Attainable goals will push you to work and save further to achieve it. Identify the steps that are required to reach your goal.

Example:

You need to save Rs 20000 per month to achieve the goal. Cut your expenses to boost the surplus. You can park your surplus in instruments to fund the goal.

Realistic Goals: Your financial goals should be realistic. Know your capabilities, Priorities and stretch yourself to achieve it.  Don’t take too much risk in achieving your goal. Goals get changes as time passes. So set a realistic goal to achieve.

Example:

You have never gone a foreign vacation, going for a foreign vacation is a realistic goal. It motivates you to achieve the goal.

Time Bound: Your financial goal should be time bound. Setting goals with the timeline will help you to monitor the progress and attaining it.

Example:

Going for family vacation after 12 months is time bound. You will be able to accomplish goal after by saving Rs 20,000 for 12 months.

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