How to Set Meaningful Financial and Frugal Goals for Yourself

Many people – myself included – like to use the month of December as a time to reflect on personal goals, both the ones that we’ve been working on throughout the year as well as ones that we might embark on in the future.

Most years, I wind up setting several goals for the upcoming year and, if they’re planned well, I end up finding some level of success with almost all of them. For example, in 2017, I lost a surprising amount of weight during the first half of the year, read a number of very challenging books, and pushed myself to join taekwondo.

Over the years, I’ve learned that two specific elements make a goal really click for me.

First of all, a good goal must be a SMARTER goal. SMARTER is simply an acronym that describes how to set up a good goal for yourself. Let’s run through what that means.

“S” means specific. A specific goal is one that establishes exactly what actions you are going to take to make this successful. What is it you want to accomplish? What exactly are you going to do to make it happen?

“M” means measurable. A measurable goal is one where you can tell very clearly whether you’ve achieved success or not. For example, “I’m going to get fit” is not measurable at all, while, on the other hand, “I’m going to run a 5K in 20 minutes” is very measurable. It is extremely clear whether or not you can run a 5K in 20 minutes or not.

“A” means attainable. Is this something you can really do? The best way to ensure attainability is to take on something that is mostly under your control and is a natural outcome of your effort but is something that will really challenge you to make it happen. Don’t make a goal reliant on the choices and actions of others.

“R” means relevant. Does this goal, when you achieve it, bring about specific things you want in your life? Is this a worthwhile goal? Is it in line with what you want in your broader life?

“T” means time-specific. This just means you’re committing to completing it within a certain timeframe. By simply adding a timeframe to a goal, you make it time specific.

“E” means evaluate. This means you step back regularly and consider how your progress toward your goal is going and whether or not you need to alter your plans. A good goal has a regular evaluation as a part of it.

“R” means review. If your evaluation isn’t good, what can you change about your goal and your plan to get there to make it better? That’s what review is all about.

Second, a good goal must be personally meaningful, not just something you’re doing to impress others. The goal must be oriented around something you want to change in your own life. It’s very possible to design a great SMARTER goal without this, but without that key meaning of a goal, it is very hard to apply this to your life.

It’s easy to see how this might apply to goals in some spheres of life.

For example, you might have a vague goal like “I want to get fit.” That’s a noble goal, one that may be meaningful to you, but turning it into a SMARTER goal will make it something you can really take action on.

You might want to transform it into something like “I want to be able to run a 5K in 20 minutes and do 200 Hindu squats without stopping within one year, with an evaluation of my progress every month.” That’s a SMARTER goal, and if it comes from a meaningful place, it’s going to be a pretty good goal. From there, you can define a clear-cut plan for achieving this by starting with a “couch to 5K” program and a squat progression plan.

Another good example might come from your career. You might have a goal of getting a big promotion, which might be meaningful to you, but it’s not really something you can do.

Try turning that goal into “I will sit down with my boss during the first week of January and come up with a plan that will lead me to a promotion, then spend an hour a day working directly toward that plan for the next year and evaluate those efforts each month.” This is a perfect SMARTER goal – it’s almost entirely about your own efforts, since the goal isn’t to achieve the promotion but to put yourself into position to receive it, and it’s about as specific and measurable and time-specific as one can get.

I often have a lifelong learning goal that I’ve learned to tweak over the years. Originally, it oriented itself around reading a number of books, but now it simply amounts to devoting an hour a day to lifelong learning in whatever form I choose at the moment. Sometimes it is reading a book, while at other times it involves digging into a Wikipedia entry on a topic I don’t fully understand (like this recent one) or taking an online class or reading a scientific paper or a well-researched piece of journalism. Moving it to an amount of time I devote each day takes it out of the realm of being influenced by long or short books – it’s a lot easier to read, say, 30 short books in a year than 30 long ones.

It’s easy to see how effective goals exist in some areas of your life, but it’s often not quite as easy to see it in other areas. How does one define an effective financial or frugal goal? How do you turn the SMARTER rubric toward money issues?

This is something I’ve struggled with for years, and I’ve really only come up with a few good strategies. Thankfully, these strategies really do work for coming up with meaningful SMARTER goals in the financial and frugal spheres of life.

First, the goal needs to be oriented around your behavior and isn’t disrupted by unexpected events. If you start setting net worth goals for yourself or debt elimination goals for yourself, you’re going to often find that unexpected events can either accelerate you to the goal very quickly or can completely derail your progress. Those unexpected events should have nothing to do with your goal and your route to achieving it. Your goal should not be hindered by changes in the real estate market or the stock market. Success needs to be focused entirely on your behavior, not on things outside of your control.

Second, the goal should be oriented around steady improvement, like a weight loss goal, but success can’t be wholly dependent on that number at the end (again, like a weight loss goal). In other words, your goal should be oriented around the action you take every day or every week or whatever, not the long term results of that action. For example, an action you can take every day is to adopt a low-cost coffee solution as opposed to your current expensive routine. It’s not about how much you’re saving over the long run, but the fact that you’re taking a straightforward step every day that you know will have long term benefits.

Third, you have to have a strong tracking mechanism for the behavior change. Are you actually doing this every day or every week? Each morning, are you drinking an inexpensive coffee you made at home (or at work) or are you buying an expensive latte at the coffee shop? It’s a simple yes or no question, much like asking yourself whether you’re keeping breakfast under 300 calories and not snacking in the morning. You can track that kind of behavior on a checklist, and I highly recommend doing so.

Finally, your goal has to have some breathing room for changes in your life. The key thing to remember about a goal is that the perfect is the enemy of the good. You cannot expect, given all the variables in your life, that you will hold to a simple behavior change every single day. With that coffee change, for example, you can’t simply say “no morning coffee outside the home or the free coffee at work, ever.” That doesn’t work, because you might have a meeting with someone at a coffee shop or an old friend might invite you to meet for coffee, and there are reasons beyond the coffee to say yes. Another example: you can’t say that you’ll try to max out your pushups every single day because if you do that you’re going to quickly find yourself failing at that goal if you injure yourself or something else prevents you from completing it. Give yourself a bit of breathing room in your goal. Shoot for very good, not perfect.

How can you apply these principles to a SMARTER financial goal?

A SMARTER Financial Goal

Let’s say your financial goal for the coming year is to pay off debt. Your goal is debt repayment. That sounds nice and it’s a noble goal to head in, but it doesn’t really mean anything.

Let’s run this through the SMARTER rubric first and see what comes out the other side.

Specific This goal isn’t very specific. What exactly are you intending to do? What actions can you take that will move you in the direction of debt repayment? The reality is that you’re either going to have to spend less or earn more in order to be able to have the resources to repay debt. So, since this is a goal you intend to start on immediately, you should be focusing on cutting spending.

How will you cut spending? Do you have a plan for doing so, a specific one that draws on your actions? Perhaps you can simply say that you will spend some time each day figuring out how to reduce long term spending and then track the amount you save and use that total amount for extra debt repayment.

So, turn the goal into this – “I will spend time each day finding ways to cut back on spending, track what I’m saving by spending less, and then use that saved amount for a big extra debt payment each month.”

Measurable What constitutes success at that goal? One good way to do this is to put aside some time each day to focus on spending less money.

So, you might turn it into something like – “I will spend 10 minutes each day identifying ways to cut spending, and 10 more minutes actually putting those ideas into action, and I will track what I save and apply that savings to an extra debt payment.”

That’s great, but, as we noted above, it can still lead to failure due to a busy life. So, try something like this – “25 days each month, I will spend 10 minutes each day identifying ways to cut spending and 10 more minutes actually putting those ideas into action, and I will track what I save and apply that savings to an extra debt payment.” You can literally use a piece of paper with checkmarks in it to track this, which is what I do with a goal like this. I draw a grid with 25 columns and 12 rows, post it somewhere very obvious, and check off a box each day I succeed at the goal.

Attainable Spending a small amount of time most days toward a goal is definitely attainable. In fact, I consider that type of approach toward a goal to be incredibly attainable because it puts the failure and success of the goal entirely on how you use a few minutes each day.

Relevant Actually achieving this goal frees up money in your life so that you can reduce debt, which was the reason for even setting a goal in the first place. Thus, the goal is highly relevant.

Time-specific Quite often, in the process of making a goal specific and measurable while making a conscious effort to keep the goal focused on your own efforts above all else, it naturally becomes time-specific, and that’s the case here. It’s very clear how much time you intend to spend toward the goal, and that’s a reasonable amount.

Evaluate One approach I use for evaluation is to add a 26th column of checkboxes to my 25 by 12 grid that I often use for annual goals. That 26th column is often drawn in a different color or uses thicker grid lines. Basically, whenever I fill out a row of 25 normal checkboxes, that 26th box means that it’s time to specifically review that goal. Am I achieving things with this goal? Is there some regular but less frequent action I should be taking here (like making that extra debt payment)? Basically, you’re just adding an end-of-the-month evaluation to the goal, which is always worthwhile.

Review During that evaluation, it’s a good time to think about what’s worked and what hasn’t and whether or not you can make changes that will make things more effective going forward.

Is it meaningful? One challenge with frugal and financial goals is to make sure that the goal remains meaningful. It’s often easy to lose track of why you’re spending time doing these things.

For me, one really powerful technique for ensuring that a goal remains meaningful is that I heavily visualize what successful completion of that goal will look like. So, if you manage to complete this goal, you know that your debt load will be smaller. It’s almost impossible for that to not be true. Also, you’re likely set up in a situation where you’re spending significantly less per month than you once were, ideally without any real negative impact on your life, so you have a stream of money each month that you can direct toward financial goals. The debt will continue to melt – after that, you can build a big emergency fund or start saving for a down payment on a house or really amp up your retirement savings.

I do these types of visualizations each time I evaluate or review a goal. I think about what my life will be like upon successful completion of that goal, and the thought of being there makes me feel really good, especially when I recognize that I’m on my way. This simple practice makes sure the goal stays meaningful.

Additional Financial SMARTER Goals

Let’s look at a few other vague financial (or finance-related) goals that can be transformed into something actionable using the SMARTER and meaningful rubric.

Earlier in the article, we mentioned the “I want a raise” goal, which transforms nicely into “I will meet with my boss next week to develop a plan for how I can get a raise/promotion in a year, then I will devote an hour four out of five weekdays to making the elements of that plan happen.”

“I want to start saving for retirement” can transform into “I will meet with HR next week and sign up for the 401(k) plan at work and contribute 10% of my income to that plan, then spend ten minutes a day adopting frugal strategies until it’s easy to live on the slightly reduced paycheck.”

“I want to cook more at home” transforms into “I will make my own dinner at home six out of seven nights of the week and check out a great beginning cookbook from the library to help guide me through how to make simple dishes and become more skilled in the kitchen, and I will make a weekly meal plan to aid in the planning.”

“I want to cut back on my hobby expenses” transforms into “Each month, I will withdraw $X from my checking account for hobby expenses and all hobby expenses must come from this money with no exceptions.”

Notice what all of these goals are doing. They’re turning a vague positive notion into a straightforward action that you do on a regular schedule. Most of them allow for some flexibility so that you’re not chasing an unattainable perfection, but they each challenge you to do something better than you’ve done before. They’re all focused on your actions.

Final Thoughts

The key to meaningful financial and frugal goals is to start with the feeling in your gut that something in your life has to change, and then mold that feeling into something actionable using the SMARTER rubric. If you start with something you feel, you’re ensuring that it’s meaningful, and if you move it through a good goal rubric, you come up with something that you can actually do with some high likelihood of success.

Will you magically transform your life overnight? Likely, no. Will you make steady improvement so that your life is better than before? Absolutely.

Good luck.

Trent Hamm

Founder of The Simple Dollar

Trent Hamm founded The Simple Dollar in 2006 after developing innovative financial strategies to get out of debt. Since then, he’s written three books (published by Simon & Schuster and Financial Times Press), contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.