A goal is an idea of the future or desired result that an individual or a group of individual envisions, plans and commit to achieve. A goal is similar to a purpose or aim which results in an object or an event of some value in the future. Individuals or a group of individuals endeavor to reach goals within a finite time by setting deadlines. Some common goals are – getting high marks in exams, running five kilometers a day, to save for retirement. Proper management of goals can give great returns in all areas of personal life. Knowing precisely what one wants to achieve provides clarity, concentration and helps improve performance.

Any goal should have these five characteristics –         

      • Clarity:  A goal need to be clear and easy to understand in order to be effective.         
      • Challenge:  Good goal has just enough level of difficulty that one actually has to push themselves to achieve it.         
      • Require commitment:  It is difficult to achieve any goal without having any commitment, especially true for those goals that are somewhat challenging.         
      • Feedback:  One needs regular feedback while progressing toward their goal. This feedback can be used to make adjustments to the goal.         
      • Require planning:  More complex the goal is, more time one needs to achieve it. Proper understanding about goal complexity helps in planning next steps to achieve it.

Having goals is always beneficial, however there are a few drawbacks associated with them. One, goals are often arbitrary, meaning they may not really end up providing any significant benefit to the setter. At other times, one may set goals that are not achievable which leads to frustration and disappointment over a period of time.

What is SMART goal setting?

S.M.A.R.T goals stands for specific, measurable, achievable, relevant, and time-bound goals. These attributes are explained further by converting a common goal – “I want to save money to retire early” into a SMART goal –

    • ‘S’ is for Specific : Good goals need to be clear and concise. Thus rather than saying “I want to save money to retire early” one could rephrase it as – “I want to build a retirement corpus of INR 1 Cr in the next 10 years”. The latter goal is much more specific, and, therefore, is a better goal.
    • ‘M’ is for Measurable : Measurability helps in tracking overall progress. It allows in setting milestones that can be celebrated when they are meet or get re-evaluated. Thus, one can add condition of doing systematic monthly savings of INR 48,500 to the goal.  Now our goal becomes “I want to build a retirement corpus of INR 1 Cr in the next 10 years by doing systematic savings of INR 48,500 every month”
    • ‘A’ is for Achievable : Far too many people set impossible goals for themselves. They will almost certainly end giving up on them at some point in the future. Instead goals should be challenging yet achievable. One way is to ensure that there are multiple options to achieve the goal. For the retirement goal, there are multiple options like – 1) do systematic savings of INR 48,500 every month, 2) do systematic savings of INR 30,000 every month with 12% annual increment or 3) Make a lumpsum investment of INR 37,00,000 for 10 years. Thus, it is important to make sure that one can actually envision themselves achieving the set goal in multiple ways.
    • ‘R’ is for Relevant : Not all goals are relevant. Unless one’s goal is relevant, achieving it may not accomplish anything.  Hence, it is important to ensure that achieving one’s goal will provide them positive benefits. Thus, it is important to make sure that retirement corpus of INR 1 Cr after 10 years will help in meeting your other life goals.
    • ‘T’ is for Time-Bound : Effective SMART goals must have a target time attached to them. In this case, the goal has a time-frame of 10 years associated with it. This helps in working towards its success since there is a target date in mind for the goal.

Thus, one can see in the above example that the initial goal of – “I want to save money to retire early” changes into SMART goal – “I want to build a retirement corpus of INR 1 Cr in the next 10 years by doing systematic savings of INR 48,500 every month”. Further, an individual has also identified two additional fallback saving options to ensure the goal is achieved by the end of 10 years period.

An individual or family, can build SMART financial goals themselves or take help of a professional financial planner. You can read more on financial planners in this post – What you should know about Financial Planners

How to set SMART financial goals?

Ideally, SMART goal planning should be part of our daily thinking since all of us have something to achieve in everyday life. However, An individual or family can set SMART financial goals the moment they aim for something to achieve over a period of time. There are four steps to build SMART financial goals  –

1. Build a strong understanding of your income, expenses and savings with help of your financial  planner.
2. Figure out what really matters to you and your family by reviewing you every need, desire and fantasy with your planner. In other words prioritize your aims. Post prioritization, whatever is left are your crude goals.
3. Sort your goals into three groups based on importance and time      required to meet each of them. These three groups are – what’s within reach immediately, what will take a bit of time, and what will take lot    more time. Take inputs from your planner to get better understanding on how to group them.
4.  Apply a SMART- goal strategy with help of your planner.

Why are SMART goals important?

Financial planning using SMART goal setting provides long-term vision, intermediate mission and short-term motivation. SMART goal setting brings structure and measurability to the financial plan. It promotes focusing of one’s intention, desire, knowledge, and resources towards making their goals happen over a period of time. Thus, setting SMART financial goals helps an individual or family in becoming more accountable and ensures real progress is made to achieving them – by undertaking periodic reviews and by doing required course corrections. They allow an individual or family to see progress in what might have been a long, and perhaps difficult grind. Thus enabling an individual or family to take pride on successful completion of these goals.

How to achieve SMART goals?

The best way for an individual or family to reach their financial goals is by using the iterative process of financial planning. This iterative process of financial planning has four basic steps – 1) Collect data to understand their current financial situation, 2) Create a Financial plan, 3) Implement the financial plan, and 4) Undertake periodic review to do course corrections.  You can read more about financial planning process by reading this post –Elements of financial planning & challenges it fixes. This iterative process can be done by an individual or family all by themselves or with the help of their financial planners. You can learn more about the role and responsibilities of a financial planner by reading this post – Financial planner : Their Role and Responsibilities.


In this article, we have introduced you to the basics of SMART Goal planning, its importance and how it is done by a financial planner. For more information please feel free to reach out to us via email at – enquiry@taptoprosperity.com or by phone – 91-9515475381.

Next Article – Asset Allocation Part – I : An Introduction

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any entity prior to publication.

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