Setting financial goals is a skill. Believe it or not, it can be done incorrectly. To most, this is surprising news, since we tend to think about goals as things we want, and it takes no skill to simply want something.

Goal-setting is part of establishing a budget, so you want to know you’re doing it right. What makes for good financial goals? How do you know whether you’re on the right track?

Vocab Lesson

Before deciding whether your financial goals are “good,” you should know the difference between wishes and goals. There’s nothing wrong with wanting something, but hopes and dreams are not goals. Desires are just that – desires. Without a plan behind them, they will always be abstract. A goal is born when a plan is established to achieve it.

A Healthy Goal

Healthy financial goals are the ones
that will do 2 things:

• Improve your life in some way.
• Position you to make or save more money later.

A hot new sports car may be a cool dream – and it may even become a planned goal once you have a road map to achieve it. But will it benefit you to have that shiny toy if other bills are not being paid on time? Is it healthy?

Examples of Healthy Financial Goals 

The answer lies in context. Here are some generally healthy goals to consider.

• Retire by a certain age, and work voluntarily.
• Simplify multiple credit payments by enrolling in a
  debt management program.
• Establishing an emergency fund.
• Start a side business without borrowing funds or losing
  current income.
• Get completely out of debt – except in the case of
  “good debt.”
• Go a certain amount of time without relying on
  high-interest credit cards or payday loans.
• Prepare family members and dependents for your loss of income
  should you become disabled or deceased.
• Repair or strengthen your credit score.

Score a Goal

Earlier we mentioned that a dream becomes a goal once it has a plan in place. A healthy goal includes 5 elements and can easily be remembered by the acronym SMART:

• Specific.
  A specific definition of the goal in mind.
• Measurable.
  Can you measure the success or growth when trying to reach the goal?
• Achievable.
  Is this goal realistic during the time frame you’ve given?
• Results-Focused.
  The end goal is in mind.
• Time-bound.
  A date for achieving the goal.

Once all 5 elements of your plan are put on paper, you can start taking steps to achieve your goal. This is a thrilling time, as the novelty of hard work and sacrifice has not yet worn off. Enjoy it, and keep your road map handy. Surprises (even ones you didn’t write down) will come up, and you may get off-track temporarily, but with your plan written down, you can refer to it again and again to find your way back on track.

To turn a dream into a goal, start with a plan. If you’re overwhelmed and don’t know where to start, phone a non-profit credit counselor to help you wrap your mind around what kind of healthy goals are attainable for you at this stage of your life.

This article was syndicated and originally appeared on the CESI Debt Solutions website.