I never tire of seeing you guys meet your goals. As a financial counselor, I thrive on seeing people who have lost hope gain a new insight and ability to beat their debt. I love watching a family who has no clue what’s going on with their money decide to change and start to take control of their finances. I am energized by the man or woman who realizes it is more important to be debt free and have money in the bank than it is to have lots of unnecessary stuff. But the one question that I’m constantly asked is HOW? How do you accomplish freedom from debt? How do you save up and pay cash for a car? How do you go to college and avoid student loans? Almost no one asks why – they already know the why. So let’s talk about the how.
Assuming your formal educational experience was anything like mine, goal setting was never a part of the curriculum. It was in my first job out of college that anyone sat me down and made me write out goals and reviewed them with me. Schools totally need to teach how to set goals. It isn’t that hard, so let’s start with some education. Diana Scharf Hunt said that “goals are dreams with a deadline.” From all my research and experience, the best way to measure a goal is to make sure it fits the S.M.A.R.T. criteria. For those who haven’t heard of that, let’s go through each one:
S – specific. You can’t call it a goal if you can’t tell me why you want to do it, what’s involved, etc. Be specific about what you want to accomplish.
M – measurable. How can you know if you met a goal if you can’t measure success? Point me toward the target and I’ll have something to aim for and shoot at. Then, we can go look at the target together to see if I hit it.
A – attainable. Dreams are great, but many dreams won’t ever be accomplished. Goals should stretch you, but they shouldn’t be impossible.
R – relevant. Some people set goals that don’t matter to themselves or anyone else. It would be like me setting a goal to read the owner’s manual for each year-model Ford Pinto by the end of this month. That’s specific, measurable and attainable, but who cares? I don’t own or want to own a Ford Pinto. That goal has no relevance to me.
T – timebound. If you don’t know when to measure the goal’s completion, you are never able to call it a goal. You must set a deadline. This drives urgency and importance to get something accomplished rather than sit around considering whether or not to do something.
Here’s how to go about it. Spend an hour or two dreaming up things you want to accomplish. Narrow it down to a few good ones, and then turn those into goals. Make sure each has all the components outlined above to make it S.M.A.R.T. Then map out the path and timeline to reach each goal. I know that sounds simple, but it doesn’t need to be more complicated than that. Let’s go through an example.
Let’s say you have a dream of never having another car payment. That’s a dream. Now, let’s bring in some reality and turn it into a goal. Reality says you owe 12 more $400 monthly payments before it is paid off. So how about a goal that says, “Pay off car within 12 months.” That’s a goal – once accomplished you’re half way to your dream. Let’s continue. Reality says this car will die in 2-3 years after it is paid for. Reality says you can’t afford to pay more than $400 per month for repairs and/or savings toward another car. So how about setting a goal that says, “Between December 1, 2013 and December 1, 2015, set aside $400 every month in a dedicated “car account.” Now you have a second goal, and those two combined accomplish your dream. As long as you can remain on the cycle of saving toward a car each month, you’ll never owe a creditor for your ride again. In this case, 2 goals = 1 dream accomplished. By the way, this is exactly how Stacy and I save for our cars (and other big purchases). Since we’ve been at it a while and tend to keep cars a long time, we don’t have to save very much each month to be able to always have enough money saved to replace a car when the need arises.
Since I’m a financial guy, I tend to make most of my goals about money. I may tell people to establish some goals about savings accounts for a rainy day (emergency funds are critical!). I may tell people to establish some goals about paying off their debts faster or getting a raise/promotion at work. Goal setting is YOUR process. The best news of all is that you are in charge. Since I’m not checking your homework, it’s on you to decide what’s important and set the goals around it. But I’m here to help, and I bet many other readers would be too. I’d LOVE to see some of your goals in the comments below.