Financial Goal Setting Frameworks
The SMART Goal Framework
A simple, powerful framework for creating effective goals. Your goals must be:
Vague goals are useless. Be crystal clear about what you want to achieve.
Vague: "I want to save more money."
Specific: "I want to save $10,000 for a down payment on a house."
The OKR Framework (Objectives & Key Results)
Borrowed from the tech world, OKRs are a more advanced way to structure your ambitions. This framework separates your inspirational goal from the measurable results that prove you’re on track.
Objective: The “What”
A qualitative, inspirational, and ambitious goal. It should be exciting.
Example Objective:
“Achieve a state of complete financial flexibility where I can work on what I want, when I want.”
Key Results: The “How”
3-5 quantitative, measurable outcomes. If you achieve them, you have definitively achieved the objective.
Example Key Results for the Objective above:
- KR 1: Increase net worth from 400,000 by the end of the year.
- KR 2: Generate an average of $1,500 per month in passive income.
- KR 3: Build a liquid emergency fund that covers 9 months of living expenses.
Goal Hierarchy: Connecting the Short and Long Term
Your goals should exist on different time horizons, and they should support each other.
- Long-Term Goals (10+ years): The big picture. (e.g., Financial Independence, Dream Retirement).
- Mid-Term Goals (2-5 years): The major milestones on the way. (e.g., Save for a house down payment, Pay off all non-mortgage debt).
- Short-Term Goals (Next 12 months): The immediate actions and habits. (e.g., Max out Roth IRA, Increase savings rate to 25%).
Your short-term goals should be direct steps toward achieving your mid-term goals, which in turn are steps toward your long-term vision.