By S Ravi
In the world of finance things are always changing. The markets go up and down. The rules are always being updated. So it is really important to have a plan. If you want to be good with money you need to turn your dreams into small simple steps that you can actually do. For people trying to manage their money the difference between wanting something and actually getting it is having a good plan.
The SMART method is a known way to make a plan that works. It helps people make their financial goals clear. This method can help make your financial goals happen. It is about making a plan that is easy to follow and that is what people need to be successful, with their money using the SMART method.
To do well with money you need to have an idea of what you want to achieve. This is similar to how a company works. You need to have a plan and stick to it. When it comes to your money this is really important. Just saying you want to save money or be wealthy is not enough. You need to make a plan. To make a plan you need to make sure your goals are Specific, Measurable, Achievable, Realistic and Timely.
This means your financial goals should be clear and easy to understand, like a journey. You should be able to measure your progress and your goals should be something you can really achieve like a financial journey. Your financial goals should also be realistic.
Something you can do in a certain amount of time which is what a successful financial journey is all about. This way of doing things helps turn ideas into simple actions that you can actually do. It gives you the focus, discipline and accountability you need to make financial decisions that will last a long time. The methodology makes sure you stay on track with your goals and helps you achieve long-term financial success, with the methodology.
The Foundation of Success: Why Structure Matters
So you want to make a financial plan. This plan should not be based on ideas. You need to think about what you want to do with your money. Write down your goals and make sure they are part of your budget. There is a way to set goals called the SMART method.
People over the world use this method because it helps you really think about what you want to do and if you can really do it. The SMART method has five parts. If you follow these parts you are more likely to get what you want. You might want to save money to buy something or you might want to be able to support yourself without working or you might want to have a nice retirement. Financial goals like these are what the SMART method is, for.
Specificity: The ‘What’ and ‘Why’ of Your Goal
The first thing you need to do when setting goals is to be very clear about what you want. Your financial goal should be specific and not vague. It should answer the questions about your goal.
What is your financial goal? Who is involved in your goal? Where will your financial goal happen? When will your financial goal happen? Why do you want to achieve your goal? Your financial goal should be able to answer all these questions.
When I think about saving for retirement I do not just say I want to save for retirement. I say I want to save Rs 5 Crores for retirement by the time I’m 60 years old. To do this I will put Rs 50,000 into my account every month. This money will go into kinds of investments like mutual funds and stocks.
My goal is to have money so I can do what I want when I am older. This plan is very clear. It tells me what I need to do. It helps me stay motivated because I know what I am working towards. Saving for retirement is important to me.
Having a plan like this helps me feel more in control of my retirement savings. When you have a clear idea of what you want to achieve it is a lot simpler to figure out what kinds of investments and savings plans are the best fit for your money. The goal is what helps you decide on the investment vehicles and saving strategies.
Measurability: Tracking the Trajectory to Success
Any good business or project needs to have some way to measure how it is doing. This is also true for money goals. You need to be able to say what you want to achieve. This means you have to answer two questions: how much money do you want and how will you know when you have got it. It is really important to be able to measure your money goal.
For example, saying you want to make Rs 5 Crores is a goal that you can work towards. Saying you want to save Rs 50,000 every month is a good short term target that you can check on all the time. Being able to measure your progress helps you to keep track of how you’re doing and make sure you are on the right path.
Money goals, like Rs 5 Crores have to be measurable so you can see how you are doing. When the savings or the investment returns do not go as planned the parts of the plan that can be measured will show that there is a problem away.
This means that people can make changes to get back on track before the difference between what’s really happening and what they want to happen becomes too big.
The savings or the investment returns need to be watched so that any problems with the savings or the investment returns can be fixed quickly.
Achievability: Balancing Ambition with Capability
A good goal is one that you can really get to. This means it has to be something you can do with the money you have, the budget you’re on, the skills you know and the time you have.
If you try to do something that’s just too hard like trying to save Rs 1 Crore in a year when you do not make a lot of money you will just get frustrated and tired. To get what you want you have to figure out what you need to do and be honest about what it will take.
You have to know what steps to take to achieve your goal and what you will need to get it done. Achieving a goal like this is about being realistic and taking it one step at a time to achieve your goal. When you are planning for a retirement goal you need to see if it is really possible. To do this you have to look at how much money you have coming in and going out right now, what debts you already have and how well the things you invest in have done in the past and how risky they are.
The main idea is to set a retirement goal that pushes you to do it but is not so hard that it is too much to handle with the money you have now. You want a retirement goal that is challenging but still works with your financial situation so you can really achieve your retirement goal.
Relevant: Aligning Goals with Your Life’s Purpose
When we talk about something being achievable we are talking about if we can do it.. The idea of something being relevant is different. It is a question that makes us think about if we should do it.
Does our goal really match what is important to us and what we want to achieve in our life? For example let us say we want to buy something that’s very expensive and fancy. We might be able to buy it. It is achievable.
But if buying this thing means we have money to do something more important like pay off debts that have high interest or pay for your child’s education then it is not really relevant to our financial situation.
The goal of buying something does not match what we should be doing with our money. Achievable goals are important. Relevant goals are also very important because they help us think about what we should be doing with our time and money.
Relevance is what links your money situation to your life. You need to think about this: Is your retirement savings goal realistic when you consider the inflation rate, the expenses you will have in the future and the kind of life you want to live? Is this goal really important to me now or should I focus on other things, like building up my emergency fund or getting health insurance that I can afford? When you make sure your goal is relevant it gives you the motivation you need to keep going. Make the hard work of saving worth it because you are working towards the life you want.
Timely: The Urgency of a Deadline
The letter T in SMART is really important because it makes us think about time and being responsible. If we do not have a deadline our goals are things we want to do someday but we never actually do them. When we are making plans for our money we have to remember that time is not on our side. The stock market and our own financial lives are always changing.
We have to be careful. We need to say when we want to start and finish something. Like having enough money to retire by the time we are 60 years old. SMART goals are all about making sure we have a plan and we stick to it so we can achieve our goals, like retirement funding by a time for example by the time we are 60 years old. To achieve a goal you need to make it smaller. This means you have to break down the goal into smaller goals that you can finish in a short time. For example you can say you want to have Rs 6 Lakhs in investments by the end of the year.
You have to set deadlines for these goals. This is very important because it helps you keep going. When you have deadlines you can check how you are doing regularly. It also makes you take action and do something every day to reach your goal of accumulating Rs 6 Lakhs in investments. Having these small deadlines is crucial for your long-term goal.
The Path Forward: Track, Review, and Adjust
The SMART method is not something you do once. Then forget about it. It is something you have to keep working on. You have to be disciplined and keep at it all the time.
Even if you have a good financial plan you still need to check it and make changes sometimes. This is because things in your life and in the market are always changing. For example the economy might get bad suddenly. You might get a new job or you might have a new baby.
If you keep track of how you’re doing with the SMART method you can stay in control of your money. You set goals for yourself. You check to see if you are meeting them. This way you are in charge of what happens with your money.
You can make sure you are doing what you need to do to reach your goals with the SMART method. This proactive adaptation is what separates successful goal-setters from those who fall short. The SMART framework provides the blueprint for this continuous monitoring, allowing you to adapt your strategy as needed, retain control, and ultimately define a secure and successful financial future.
(The author is Former BSE Chairman, Founder Ravi Rajan and Company)
[Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP News Network Pvt Ltd.]
