Setting SMART Goals


It’s been about 5 years since I ran – and okay, now I jog – further than three or four miles. It’s time for that to change. With that in mind, my daughter and I have committed to run a half-marathon together in about six months. We have a goal and we’ve mapped out a training plan with specific milestones and actions to carry us to the finish line.

Unfortunately, a lot of people can’t say the same about their own financial plans. According to the tenth annual Americas Saves Week survey*, only 46% of those surveyed had a savings plan with goals. In my mind, goals – like our ambition to knock out a road race – are what motivate us and keep us on track when times get tough or decisions hard.

Do your financial goals do that for you?

Let’s look. Fortunately, we don’t have to reinvent the wheel, but can use the framework of “S-M-A-R-T” goal-setting. It’s something I’ve heard and seen many times over the years, but I didn’t realize it dated all the way back to the mid-1950s and Peter Drucker’s book, “The Practice of Management.”  Here, I’ll take that approach and apply it to the number one financial goal I’ve regularly encountered over the years: “I want to get out of debt.”

Let’s examine how this seemingly perfect goal often fails and what you can do to get it right instead:

S is for Specific

The usual problem: The intent of “get out of debt” is good, but it’s certainly not specific. Are you really talking about your mortgage, car loans, student loans and credit cards or just one part or another? What are you really trying to accomplish?

The fix: Be laser-focused. This time around, identify a specific debt or dollar amount to attack.

M is for Measurable

The usual problem: While oft-overlooked, this one should be fairly easy for financial goals. Obviously, you can’t measure what you haven’t defined. However, with step 1 done, you’ve now got a clear measuring stick to work against.  If the goal is to shed $5,000 in credit card debt, you’ll be able to map out a plan with periodic benchmarks to track your progress. For example, if you’ve knocked $3,000 of debt off the books you know you’re 60% of the way home.

The fix: Map it out.  I’ve built dozens of spreadsheets for clients specifically designed so they can measure their progress but it doesn’t have to be complicated. There are online calculators to help chart your path. Heck, write your goal down and post it on the fridge.

A is for Attainable

The usual problem: Letting your enthusiasm overtake your realism.  Is the general notion to get out of debt attainable? For most folks I know, it is, but typically, not right away. Don’t put your goal in jeopardy by biting off more than you can chew.

The fix: Focus on the bite, not the meal. How do you eat an elephant? One bite at a time. Apply that logic to your debt reduction goal.  Instead of trying to eat the entire debt elephant, focus on just one piece, one bite at time.

R is for Relevant

The usual problem: Incorrect focus. Why did you get in debt? Maybe it wasn’t a one-off medical situation or an isolated bad decision, but rather habitual overspending or living beyond your means. If that’s the case, “getting out of debt” might not be the right goal.

The fix: Work on causes, not effects. Switch your goal to one that focuses on monthly spending control or increasing your income (or both) and adherence to a budget. That way, you’re more likely to have lasting success.

T is for Time Bound

The usual problem: No specific time frame.  If you’re like me, you work better with a deadline and guess what, your goals do too! I know exactly when my daughter and I will be poised at the starting line and that alone is a guiding and motivating factor.

The fix: Set a date to get the task at hand knocked out as part of your new goal setting process.

So, if the running shoe fits, put it back on and give it another try.  This time with carefully thought out and constructed goals that give you a better shot at success.

Story Continues
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