Bitpanda Money Matters #02: set SMART goals for 2025

Now that you have audited your finances and have a clearer understanding of where you stand, it’s time to set some goals. After all, what’s the point of building wealth if you don’t have a clear vision of what you're working toward? That’s where setting SMART goals comes in.

What are SMART goals?

SMART is a framework that helps you identify and define your financial targets. The acronym stands for Specific, Measurable, Achievable, Relevant and Time-bound; each element ensures that your financial goals are clear, realistic and achievable. 

Specific

Your goal needs to be clear and precise. Rather than a vague wish like I want to save money, get specific: 'I’m aiming to save €5,000 for an emergency fund by the end of the year.' The more precise your goal, the easier it is to stay focused and motivated.

Example:

• Unclear: I want to save more money

• SMART: I want to save €5,000 for an emergency fund by the end of 2025

Measurable

Tracking your progress is key. This is where the specific target comes in as it helps to show how close you are to reaching your goal. For example, if your goal is to save €5,000 by the end of 2025, break it down into manageable monthly milestones.

• Goal: save €5,000 by December 31, 2025

• Milestone: save €400 per month (to reach the target by the end of the year)

Achievable

While your goal should challenge you, it also needs to be realistic. If you’re only earning €1,500 a month, aiming to save €1,400 in a month is not realistic. Instead, adjust your goal to something that fits within your income and expenses but still pushes you.

Example:

• Unrealistic goal: save €1,400 in 1 month on a €2,500 monthly income

• Achievable goal: save €400 per month for the next 12 months, totalling €4,800 by year’s end (you can adjust based on bonuses or extra income)

Relevant

Your goal should align with your overall financial plan. If your long-term objective is to buy a house, saving for a down payment is highly relevant. If you’re planning for retirement, contributing to your pension fund makes sense. Relevance keeps you focused on what matters most.

Time-bound

Lastly, give yourself a deadline as they create urgency and help you prioritise your financial goals.

Example:

• Goal: Save €5,000 by the end of the year

• Deadline: December 31, 2025

Breaking down your goals

Once you understand the SMART framework, it’s time to break your larger goals into smaller, more manageable ones. Here’s how to approach it:

Short-term (monthly)

These are goals you can achieve within the next month or two. For example, you might aim to reduce spending by €100 per month or set aside €200 for an emergency fund.

Mid-term (yearly)

These are your goals for 2025. For instance, our previous example from above Save €5,000 by the end of the year or Pay off €2,000 of credit card debt.

Long-term (5+ years)

Think about where you want to be in five years or more. Perhaps you want to buy a house, build a diversified investment portfolio, or retire comfortably. These long-term goals will guide your shorter-term actions.

Make your goals actionable 

It's one thing to set goals, but it’s another to make them actionable. Create an actionable plan that outlines the specific steps you’ll take to achieve each goal.

Here's what your example plan could look like for saving €5,000 by the end of 2025:

1. Set up a dedicated savings account 

2. Automate monthly contributions from your salary

3. Track spending and cut back on unnecessary expenses like eating out, impulse buys or subscription services

4. Monitor your progress at the end of every month to stay on track

Set your SMART goals for 2025

For this week’s task, follow these steps:

1. Choose 1-2 financial goals for 2025: Think about what you want to accomplish financially next year. It could be saving for a big purchase, reducing debt, building an investment portfolio or something else that aligns with your long-term plans.

2. Make them SMART: Ensure your goals are specific, measurable, achievable, relevant, and time-bound as explained above. For example, instead of an unclear goal like Save for a car, reframe it as Save €10,000 by the end of 2025 for a down payment on a new car.

3. Break them down into short-term, mid-term and long-term goals: Break your main goals into smaller and more manageable steps: short-term goals could be monthly savings, mid-term goals might be investment milestones and long-term goals align with yearly objectives.

4. Write down the actionable steps you’ll take: List the specific actions needed to achieve each goal. This might include setting up automatic transfers, cutting non-essential expenses or exploring ways to increase your income.

What’s next?

Now that you’ve set your SMART goals, you’ve got a roadmap for your financial journey in 2025 and are ready for our next article on creating a financial plan. 

Life is unpredictable - emergencies happen and expenses can pile up. Having a solid plan in place will help you stay calm and on track, no matter what challenges come your way. In our next article, we’ll guide you through building a financial plan that includes an emergency fund, budgeting strategies and other key elements to keep you financially secure. 

In the meantime, you can explore more articles on financial planning on the Bitpanda Academy. 

Disclaimer

This article is distributed for informational purposes, and it is not to be construed as an offer or recommendation. It does not constitute and cannot replace investment advice.

Bitpanda does not make any representations or warranties as to the accuracy and completeness of any information contained herein. 

Investing carries risks. You could lose all the money you invest.