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How to Use SMART Goals to Pay off Debt

The origin of SMART goals isn't based in the world of personal finance, but its principles can be applied to budgeting, saving, and paying off debt.

December 21, 2021

Goals. We love to set them, but on the whole, we’re not great at following through with them. For example, a paltry 8% of people who set New Year’s resolutions actually accomplish them.

That number might feel discouraging, but it doesn’t have to. The reality is, many of us set financial goals we’re bound to cast aside, with unachievable standards and vague timelines. 

Want to start making money goals that work for you? We’re breaking down SMART goals and how they could make achieving your financial goals more attainable. 

What are SMART goals? 

The origin of SMART goals isn't based in the world of personal finance, but its principles can be applied to budgeting, saving, and paying off debt. The term SMART goals was first used in the 1980s and mapped out a solution for leaders and executives to better meet the goals they set. The difference between SMART goals and setting any old resolution is the realistic criteria you use to create the goal. 

SMART is an acronym that breaks down into: specific, measurable, achievable, relevant, and time-sensitive. 


The “S” of SMART stands for "specific" or sometimes "significant." When creating a goal, it helps to be as specific as possible about what you want to achieve. For example, instead of setting a goal to “get in better shape,” you might set a goal to run a half marathon. 


Next comes the "M," or "measurable." If you don’t have a way to measure a goal, how can you tell if you’ve met it? Being able to measure the final result and your progress along the way can make it easier to stay on track. 

So, in the case of your goal to run a half marathon, you may sign up for a race on a certain date, meaning you’ll need to meet the goal by then. Additionally, you have a measurable distance in mind, 13.1 miles. With that final distance in mind, you can work backward to set smaller goalposts throughout your training. 


Now comes "A," standing for "achievable." This can require some self-reflection and a little tough love. Let’s go back to the running example — if you’ve never run in your life, it might not be realistic for you to run 13.1 of them in a few months. Instead, you may choose to run a half marathon in six months or start with a 5K in a few weeks' time. 

While it may be tempting to reach for the stars when setting a goal, you may feel discouraged if it’s too far out of your reach. Remember, you can always surpass a goal, but if it’s too lofty, you could have a hard time meeting it.


Following achievable comes "R," or "relevant." This concept can be a little trickier to grasp than those above. When creating a goal, you want to make sure it carries an emotional relevance or weight. 

Why have you made it your goal to run a half marathon? What do you hope to feel when you meet your goal? Starting a running practice could make you feel healthier, with more energy. You may pick up running to feel more in tune with yourself. 

When you don’t take the time to connect your goal to an emotional tie, it’s easier to throw it out when things get tough. But, if you remember why you’re working towards something and the feeling it gives you, you’re more likely to stay steady. 


Finally, "T" is "time-sensitive" or "time-bound." This might be the most identifiable for many. When you don’t put a time parameter on a goal, there’s not much motivation to get started or stay the course when things get tough.

If you’re trying to run that half marathon, signing up for a specific date will help hold you accountable. It also gives you the framework to help break down the milestones you’ll need to hit right away.   

How to set financial goals and achieve them

SMART goals can be applied to everything from getting a promotion to running a marathon or managing money. SMART financial goals work well because cash flow is easy to measure and lends itself to specificity. 

The money goal you make will be specific to you, but here are some common SMART financial goals examples.  

Debt repayment

Setting a goal to be debt-free can be exciting, and using SMART financial goals can take out the guesswork. 

Let’s say you’ve got $5,000 in credit card debt that you want to pay off. Here’s how the SMART financial goal could break down:

  • Specific: Reduce credit card debt down to zero. 

  • Measurable: Monthly payments and a final balance of $0. 

  • Attainable: How much will your budget allow you to put towards outstanding credit card debt each month? A structured budget can give you a better sense of what you can afford to budget for card payments. Let’s say you have $200 a month to put towards credit card payments.

  • Relevant: Debt is a stressor for many of us, but consider how you'll feel being debt-free. How can being debt-free help you meet other financial goals or do more with your time and money? 

  • Time-bound: If you can keep up the monthly $200 payments, you can realistically expect to be out of credit card debt in 25 months. 


Saving money

Lots of us wouldn’t mind having some extra money in the bank. The trouble is, without parameters, you may be less encouraged to save. Let’s say you want to start an emergency savings goal.

  • Specific: Let’s say you want to build an emergency fund. Set an exact amount, like $8,000, as the goal.  

  • Measurable: You can measure the long-term goal with the $8,000 total, but keep tabs along the way. How much will you set aside each month, based on your budget?

  • Attainable: Don’t set monthly goals that are higher than your budget allows. Slow and steady saving is better than being overwhelmed and giving up on the goal.  

  • Relevant: Why is an emergency budget important to you? Will it lend you peace of mind or help you plan for an unexpected expense? Maybe it’ll even lead to a better night’s sleep. 

  • Time-bound: Working backward, how much can you save each month from reaching the $8,000 goal? If you can swing $200 a month into emergency savings, you can do it on a 40-month timeline. 

These are just two of the ways SMART financial goals can be used to help you follow through. When you create a SMART goal, you create a specific roadmap, making it simpler to achieve your goal. 

Using SMART financial goals for debt-free living

SMART goals may have started in the boardroom, but they can be just as beneficial for your budget. If you have trouble following through with plans or objectives, sitting down and creating a SMART financial goal may be the tool for financial freedom. 

SMART goals are just one tool to help your finances. If you’re using SMART goals to get out of debt, consider checking out Tally. Tally’s smart debt repayment tool can help you pay off credit card debt faster with a low-interest line of credit. With Tally and a SMART goal, you could be well on your way to debt-free living.  

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) Will be between 7.90% - 29.99% per year, and will be based on your credit history. The APR will vary with the market based on the Prime Rate.