The SMART Path to Financial Independence

SMART financial plan Bossmanjax

You may be familiar with the SMART acronym used for setting and achieving meaningful goals: Specific, Measurable, Achievable, Relevant, and Time-Based. You can use the concept, like I am, to establish a road map for managing your money and achieving financial independence. How does it work?

SMART helps you establish “the big picture” associated with your financial goals. It provides a reference tool for me. Am I doing what I said I would do with respect to my finances? What do I need to adjust to hit my financial goals each year? It’s easy to get started and there are tools available to help you. 

One thing you can do right now is download the free SMART template from Microsoft for guidance. If you don’t use PowerPoint, I saved a PDF copy you can print (download PDF template). Now, let’s take a look at how we can use SMART to be smart with our finances.

Specific Financial Goals

Start by writing down a few of your financial goals. Be thoughtful and specific about what you want to focus on. For example, one of my initial goals was to build up my emergency fund. I set a goal of a specific amount of readily available funds I wanted for emergencies. I set specific amounts of funds I wanted to save for the annual contribution to my Roth IRA (the max allowable). I set a specific amount for my 401(k); in my case this was a SEP initially. It is now a Solo 401(k) plan. I set specific goals for my retirement portfolio, and so on.

Measurable Financial Goals

Once you set your goals, it is easy to measure how you are doing. However, it requires scheduling a regular review. Say once a month you check your account balances or review your net worth. I use to view all of our accounts in one place. You might use that or a spreadsheet you update once a month. The key is to have an easy way to measure how you are progressing with your goals. Write down exactly how you intend to measure your progress for each of your goals.

Achievable Financial Goals

Are your financial goals achievable based on your current income? They may not be now, but you may be looking for additional income opportunities to hit your goal. As you can see, setting the goal helps you focus on ways to achieve that goal. Another one of your goals may be to increase you income, establish recurring revenue streams, etc. Subsequently, you may focus on your next goal of a higher savings rate. The process often requires achieving one goal before working on the next goal, etc. Aim high, but be realistic.

Realistic Financial Goals

After attending a local financial seminar, I met with the presenter. He is a CPA and financial planner. He offered a session at no cost to review my financial plan so I took him up on the offer. One of the questions he asked, “Is your investment return realistic in your plan?” “What if it is less than half of what you are assuming for the next few years?”

I set the investment return goal at what I thought was conservative (6.5%). and I believed it was very realistic given the stock market at the time (before the December correction). In December 2018, I definitely questioned if it was realistic. I still believe over “my time horizon” it will be a conservative return, but I have at least 10 years before I’ll need to use those funds. Still, I adjusted it down to 6% and increased by a few bucks how much I was saving each month (just in case).

He asked several questions associated with setting realistic goals. He asked, “Are you being realistic with respect to your potential healthcare costs in the future?” Those questions helped me focus closely on, and question, how realistic my financial goals were based on my financial model/plan. Take the time to set realistic goals and understand if you can achieve those specific goals as discussed above.

Time-Based Financial Goals

Setting a deadline to achieve your financial goals is important for sure. It helps you make better decisions on a daily basis knowing there is a deadline. Once you set a deadline, set milestone dates so you can push yourself when necessary and make the appropriate adjustments as time progresses. I focus on the milestones knowing if I achieve them, hitting the deadline will be a given. 

SMART path to financial independence #FI

SOURCE: PNC Key Planning Retirement Milestones

 Financial Goals

The following are a few example financial goals to consider. Please leave a comment below if you have some ideas to help others as well. 

    1. Set a goal to make saving automatic and start building a savings account with your first paycheck. If it’s too late for that, your next paycheck. Don’t delay and make paying yourself first automatic.
    2. Set a goal to get at least 2% or more in interest for your emergency funds without investing the funds in the stock market. Look for high interest savings accounts that pay you a sign-up bonus as well. Many are paying 2.5% interest now. Read this article on emergency funds for more resources.
    3. Set a goal to max out your Roth IRA contribution every year. Get started as early as possible in your career.
    4. Set a goal to max out your 401(k) company matching funds (always), if you have a 401(k) where you work.
    5. For those that are Grandparents, consider putting your grandchildren on the payroll and start Roth IRAs for them as early as possible.
    6. Set a goal to evaluate your insurance situation. Consider buying a whole life insurance policy at an early age, if possible. Parents can buy inexpensive whole life policies for children at a very young age. When they turn 21, plan to give them the policy so they can take over the payments and make contributions until age 65.
    7. Set a goal to understand exactly how your future retirement tax liability will affect your budget in retirement. To do so, you’ll need to estimate your RMD (Required Minimum Distributions). It is important to realize if you fail to take your RMD on time, a 50% tax penalty will be applied on the amount that you were required to take in RMDs.
    8. Set a goal to have enough cash in your retirement account to help mitigate potential cash-flow issues with down market years. You don’t want to take more than required (RMD) during down markets.
    9. Set a goal to have cash in your non-retirement accounts as well. The unexpected happens.
    10. Set a goal to evaluate what you’ll receive from social security based on your income and retirement plan. Determine when you’ll take social security based on your financial situation. If practical and possible, defer taking your social security until age 70 to max it out, especially if you are married.
    11. Set a goal to prepare a retirement tax strategy before you retire. Know what accounts you’ll access, and at what time, to reduce your tax liability where possible. Many neglect to do this from what I’ve read and they lose thousands in retirement as a result.
    12. Set a goal to have your retirement assets last until you are 95 years old; 35 years if you plan to retire at age 60.
    13. Set a goal to continue your financial education. Read books, attend seminars, etc. Tax laws change, market conditions fluctuate and you need to stay on top of the basics throughout your financial life.
    14. Set a goal that includes growing your assets in retirement to offset inflation and taxes. Based on your retirement income, taxes are deducted from Social Security, capital gains, dividends, and certain retirement account distributions. Also from what I’ve read, too many retirees neglect to allocate some funds to growth oriented investments. You’ll be retired for at least 30 years, in most cases. Some of your assets need to grow during this time.

     Using SMART to establish and achieve your financial goals is easy and it is smart. The process has helped me and I hope it helps you as well. Thanks for stopping by and please leave a comment if you have additional financial educational content to share. Thanks.


  1. I teach this acronym to my students all of the time and first came across it as an educator. Clever article connecting such a concept to finances! Also, I think it is very realistic of you to question what you are questioning. Health care is such a variable!

    • Thanks for the kind words. It is great to see others helping students learn SMART. I found the process works well with setting financial goals and monitoring progress. Again, thx.

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