OK, so you’ve got some debt, or you are struggling to save money, maybe for a nice outfit or to break into the housing market. I cannot stress enough the importance of setting goals whatever your financial situation. Goals give you drive and motivation to do, or abstain from certain habits.
For example as I’ve previously mentioned, we had a somewhat insane sounding goal of paying off the remaining $88,000 of a mortgage in one year, a goal that was completed 5 months early! Yes this had extraordinary circumstances as there was a rather large bonus we were banking our goal on, but having the goal helped massively. I know this because after that mortgage was paid off the amazing payments didn’t automatically cross onto the remaining mortgage. I didn’t instantly set a SMART goal for the remaining mortgage during our celebratory stage and the initial few months following paying off the first mortgage reflect that.
Once I set a SMART goal for our remaining mortgage suddenly I could see results as the mortgage began decreasing rapidly. So what is a SMART goal? “Paying down the mortgage” is not a SMART goal unfortunately. “Getting the mortgage down to $100K by June 30 2017” is a SMART goal. Let me explain. SMART is an acronym that goes as follows
Looking at my latest goal it fits into each of those 5 categories. It’s a specific goal rather than the vague goal of paying off the mortgage. It’s a measurable goal by using money as the measurable unit. Its attainable, but not too easy, something that I still have to work at to achieve. It’s relevant because paying the mortgage down will release some financial stress, basically the “why” factor of the goal. And finally its timed to have an end date.
In order for a goal to remain a SMART goal you cannot simply create a goal and then walk away from it and expect a brilliant result. Part of it being measurable requires actually measuring it. The frequency of measurement is up to you but for the time being I measure our goal twice monthly. Once on the first of the month, another on the 15th of the month. Others may choose to measure weekly, or even monthly. I suggest monthly as a minimum frequency to look at your finances as a goal can get off track a lot in more than a month.
To me an ideal SMART goal is an A4 (or larger) piece of paper and consists of the following.
- The goal statement
- A measurable chart (almost always a line graph)
- A list of things I intend to do to reach the goal.
- Optional: a specified reward once the goal is reached.
Spend a bit of time looking at your income, allow a portion to be set aside for living costs and bills and then from that get a rough idea of what your attainable goal might be and what needs to be done to make it possible, such as reducing your grocery bills or making extra side income. Then be sure to place your goal somewhere you can see and reflect on it frequently.