Are your goals S.M.A.R.T enough?
When it comes to saving & investing for your financial goals, the first question that comes into mind is how much to save and invest? The perfect answer to this is goal setting in the S.M.A.R.T way. Now, you might be wondering what this S.M.A.R.T. is. Let’s try to understand:
What are S.M.A.R.T goals?
S.M.A.R.T stands for specific, measurable, achievable, realistic, and timely. Therefore, anything which is not specific and not measurable or not achievable, unrealistic, and doesn’t bear any timeline cannot be tagged as a S.M.A.R.T goal. Even if a single criterion is missing, it cannot be called a S.M.A.R.T goal.
So, what do these individual criteria mean? Let’s find out.
Specific: Here, the goal must be clear, well-defined, and unambiguous.
Measurable: With this criterion, the goal can be measured in terms of requirement and progress towards its achievement.
Achievable: Moreover, the goal must be something that can be attained and is not impossible to accomplish.
Realistic: This means that the goals must be within reach and should not be unrealistic and irrelevant to your purpose in life.
Timely: The goal should have a clearly defined timeline with a specific starting and target end date. The purpose of this criterion is to help people prioritise them based on urgency.
Now, let us understand each criterion in deep and also, the ways of achieving the same.
Here, the goals must be specific to ensure a significantly greater chance of being achieved. In order to make a goal specific, you need to ask yourself five ‘W’ questions:
Who: Who is involved in this goal or who is the owner of this goal?
What: What do I want to achieve?
Where: Where will the goal be achieved?
When: When do I want to achieve this goal?
Why: Why do I want to achieve this goal?
A financial goal could be “I want to buy a car.” A more specific goal would be “I want to buy SUV from an ABC dealer in Pune to have a comfortable travel with my family.”
This criterion aims to make your goals measurable in order to measure progress. If the goal is not measurable, you won’t be able to check your progress to understand whether or not you are on the right track to achieve your goal. You need to ask yourself the following questions to make a goal measurable:
- How many or how much?
- How do I know if I have reached my goal?
- What is my indicator of progress?
Continuing with the specific goal above: I want to buy SUV from an ABC dealer in Pune to have a comfortable trip with my family. Every year, I will review my investment portfolio to adjust investments to achieve the goal.
If you wish to achieve your goals in the S.M.A.R.T way, then the goal must be achievable and attainable. To understand whether a goal is achievable or not, you need to ask yourself:
- Whether or not I have the resources and capabilities to accomplish the goal?
- Have others done it successfully before with the same amount of resources and capabilities available?
A S.M.A.R.T goal must be rational and within your reach so that, it can be realistically accomplished, provided the available resources and time horizon. In order to know whether your goal is realistic or not, ask yourself:
- Is this goal within my reach?
- Do I have the adequate time and resources to achieve this goal?
1. I want to build Taj Mahal for my Mumtaz: Though it sounds romantically fascinating, it’s irrational and unrealistic in nature.
2. I wish to buy Rolls Royce next year by investing Rs 10,000 a month: Again, quite unrealistic as the resource available and time horizon to achieve seems inappropriate thereby, making this goal unachievable.
A S.M.A.R.T goal is always time-bound, having a defined start and end date. If the goal doesn’t have any timeline, then there will be no sense of urgency or motivation to achieve the goal. Hence, to make your goal S.M.A.R.T, ask yourself:
- What is the deadline for my goal?
- By when I wish to achieve that goal?
Continuing with the specific and measurable goal above: From my next salary onwards, I will start a systematic investment plan (SIP) in XYZ fund to buy the desired SUV from ABC dealer in Pune in the next 2 years.