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5 steps to setting smart goals for saving money

Setting smart goals for saving money is an important step in achieving financial success. If you’re unsure about how to set money goals or why they’re important, you’re in the right place. By following this five-step process, you can create a solid plan that will help you save money effectively.

Whether you’re saving for a down payment on a house, a dream vacation, or simply want to build an emergency fund, these steps will guide you towards financial success. With a clear financial plan in place, you’ll be well on your way to financial stability and peace of mind.

How to set goal to save money

To set a goal in order to save money, it’s best to determine exactly what you’re saving for. Are you saving for a specific amount of money, or are you saving for a specific item or experience? Below, we’ll touch on how to start setting smart goals for saving money, whether they’re short-term goals or long-term goals, while keeping your unique financial situation in mind.

Step 1: Visualise your goals

The first step to setting smart goals to save money is to visualise where you’d like your money to take you and start jotting down some ideas. This is why setting financial goals is important, because with hard work and dedication, you’re actually able to achieve them!

What does your ideal life look like? Does it include paying off your credit card debts or improving your credit score? Perhaps there are places you’d like to visit, concerts you’d like to attend, sports or hobbies you’d like to try. You might see yourself driving a new car or a boat or renovating your home. Your dream could be to send your kids to a different school or take them on a holiday.

Think big and small. Your personal goals do not have to be long-term or complicated to be worthwhile. In fact, it’s important to have a mix of goals. This is your life and your financial goals are yours for the choosing. And be sure to set actionable and measurable goals; a vague goal is the hardest to reach.

Step 2: Get practical about your money goals

Avoid goals that are unattainable

If you’re wondering how to set money goals, start with ones that are achievable. As you review your list, you’ll probably notice that some financial goals are going to take more effort and time than others. In goal setting language, those goals that are the hardest to achieve are called “stretch targets”. Stretch targets can be great for changing unwanted behaviours or breaking out of negative thought patterns, but having too many of them in your goal list can be demotivating. It’s better to have realistic goals that are achievable.

Avoid goals that are too general

Smart goals for saving money need to be specific and actionable. For example, if you want to be debt-free, specify exactly which debts you’re going to reduce this year and by how much. If you want to have savings, specify how much you’re going to save and how often.

Avoid goals that are outside of your control

Avoid goals that rely on factors outside of your control (eg. winning the lottery). Focus only on outcomes you can directly influence by your own actions. For example, if you’re looking to get a higher paying job, focus on the behaviours required to get the job you desire. You could rewrite your resume, send it to 20 top companies and follow-up with phone calls.

Prioritise your goals in order of importance

Ask yourself: What savings goals can I start working towards immediately and what goals will have to wait? It would be nice to be able to achieve all of your goals simultaneously, but life isn’t like that. The reality is that you have to attack your goals in order of priority.

Break big goals into smaller, more manageable goals

Big goals are great, but smaller goals are easier to measure and keep on track — and you get to celebrate achieving milestones more often! For example, say you want to save $1,500 for a new fridge, break it into 12 monthly saving goals of $125.

Step 3: Write down your S.M.A.R.T. goals for saving money

What is a SMART goal for saving money? A SMART goal is one that is specific, measurable, relevant and time-bound. A good goal is an attainable goal. Make your goal measurable.

The idea behind a SMART goal is that it should capture the behaviours and actions that will lead to the outcome you desire.

S = Specific (What do I want to accomplish? Why? When? Who with?)

M = Measurable (What will the outcome look like when it’s complete? What are the milestones along the way?)

A = Attainable (Is this goal realistic/affordable?)

R = Relevant (Is this what I should be focusing on?)

T = Time-bound (How long will it take? What is the time frame and target date?)

Some budget goals examples are listed below.

Example 1

General goal: To have savings in the bank.

SMART goal: I am saving $100 from each pay for my emergency fund. By the end of this year, I will have $2,400 in my emergency sub account.

Example 2

General goal: To cut back my social spending after the New Year.

SMART goal: For January and February: I am taking my lunch to work three days a week; budgeting $80 a week for going out which I will pay myself in cash every Friday; going to after-work drinks only once a month; taking my credit card out of my wallet and using only cash.

Example 3

General goal: To save $5,000 for an overseas holiday

SMART goal: I am saving $100 per pay into my ‘holiday’ sub account so that I have $5,000 for my Bali trip in [month and date]: This year’s goal: $600 by April; $1,200 by July; $1,800 by October; $2,400 by Dec 31.

How many smart goals for saving money do you need?

The number of smart goals for saving money you set is up to you. Some people will only write down their big goals, others will prefer to write down every little goal that comes to mind. Either approach is great. The most important thing is to not let the process become overwhelming or so difficult that you give up.

Also, be sure to have separate savings for each detailed goal. You don’t want the funds for your retirement goal to get mixed in with your emergency savings.

Start with little victories and watch them add up

At MyBudget, we aren’t just focussed on how to set money goals, we want to help you achieve them and celebrate when you do.

If you’ve been discouraged about financial goal setting in the past, keep it really simple this time. Pick just one small goal to start with — perhaps taking your lunch to work for a week. Remember that financial fitness is just like physical fitness – if your aim were to run a marathon, your first training sessions would be over shorter, more manageable distances. The same principle applies to your money – little, regular steps will quickly add up.

Step 4: Review your smart goals for saving money often

Review your smart goals for saving money regularly. Are you on track? Do you need to tweak your plan? Are you progressing faster than you expected? Are there obstacles you didn’t plan for?

It’s okay to make adjustments. Your plan of action needs to be flexible to accommodate life’s changes. You might get a pay rise that boosts your budget and shortens your time frames. On the other hand, your car might need costly repairs that eat into your savings. The great thing about goal setting is that realistic plans may change, but you still have a clear target to aim for.

Setting goals on your current income is a great way to start, but sometimes you earn extra income through side hustles or overtime. Or perhaps you get a promotion and your monthly income improves. However, if your income goes down, you can reduce your monthly payments towards your goals or be more mindful about impulse spending. The latter won’t happen in an ideal future, but life throws us curveballs, so thorough financial planning and setting realistic deadlines that are scalable will only help to improve your odds of success.

Having a goals list will help you to resist distractions and overcome obstacles. It will also help you to stay focused if you think about your goals often. Keep this list somewhere you can read them once a day.

Step 5: Recognise your achievements

As you’re setting your smart goals for saving money and milestones, give some thought to how you will reward yourself along the way. You deserve to feel happy, motivated and excited about your achievements. Make room in your budget for an affordable celebration every time you achieve a milestone.

How can MyBudget help me with my savings goals?

Need help saving money? MyBudget clients are welcome to speak with MyBudget’s customer service team at any time about their financial goals, from paying down credit card debts to budgeting for a strong financial future. Readers who are not MyBudget clients are welcome to attend a free budget appointment by calling us on 1300 300 922 or enquiring online. We’re always here to help.

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This article has been prepared for information purposes only, and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information in this article you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.