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. Would you like to set up a child trust fund or junior ISA?
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.
I love how simple the SMART system is! It seems like it would work for both the finances and life goals!
I just can’t say it enough…it’s smart. Ha!
I absolutely love reading your posts. We used to be able to blow through some money several years back. Then we got stupid, ran up some credit cards, and was drowning in debt. So we consolidated them on an unsecured loan….Did I mention I hate hate hate Bank of America?!!! But I plan on having my home paid for in about 2 years, then I can put that extra money on paying off Bank of America quicker. My son graduates in 3-1/2 more years. I will have my house, Bank of America, and hopefully most of Sallie Mae paid off by then so that I can pay CASH for my son’s college! NOW THAT IS MY GOAL!!!
Good goal – you can do it!
Hello!! I love reading all of the stories!!! I recently got married a couple of weeks ago. I knew going into this marriage my husband would have student loan debt which he never paid and he is in his early thirties. (he only owes $9500) our goals are to pay off our car payments, he has one and I have one, pay off the student loan in 5 years. We started a savings account for him for retirement since he gets no pension and no 401k at his work. My work gives us both and they match 3% of our 401k. I just started a budget book for us the last couple of weeks because we need to find a bigger place like a townhome or a house to rent while we save for a house because I am 6 months pregnant and our tiny one bedroom apartment is too small for us. I am also trying to learn how to cut down on certain things in our budget so that way I can put that extra money to pay off the debt and put into our savings. We also have a savings for emergencies and for car maintenance. It’s tough but we are getting there.
Congratulations on your marriage and pregnancy!!! 🙂
These goals are great! Keep it up! Just remember to make them S.M.A.R.T. That guarantees you can stay accountable to them.
I love this post – my husband and I read it together and decided that our goal is to have our house (well – it’s almost our house since we won’t close on it until mid-December) paid off by on or before my 40th birthday. That will be in 11 years instead of the “normal” 30 and will save us more than $50,000 in interest over the life of the loan. Thanks for the push!
That is one fabulous goal! You can do it!!! 🙂
I learned about SMART goals when I was training to become a nurse about 17 I I learned about SMART goals about 17 years ago, when I was training to become a nurse. It never occurred to me that this plan could be used with regard to my finances. As a result, I had a prosperous career and was out of control financially. My family found Dave Ramsey’s plan for financial freedom and I am ECSTATIC to report that after 2 complete months I now know EXACTLY where my money goes (to the penny!), have established our $1000 emergency fund, climbed out of our overdraft protection plan, paid off our Mastercard and are now working on killing a loan taken to pay for a new furnace which died last spring (projected kill date March 2013). After this, we will have a visa card to pay off and we will be DEBT FREE except for our mortgage – target date Jan 1, 2014.
I am guilty of saying “I make a decent wage, why am I living pay cheque to pay cheque.” Well now I have SMART goals to get out of debt and plan for my retirement.
I have to say it….that’s just smart. BHAHAHAHAHA! Okay, come on – that was funny.
I love this site and I love your posts Barry! While they give me hope and a renewed motivation for financial “dreams” I’m still very much in the “how”. I mean, I know how but when I look at our spreadsheet every month I don’t see how we can make minimum payments on everything, and save, and pay more towards debt to pay it off etc. I have researched every money saving tip in the book. We have plain phones, cut up our credit cards, no cable, used vehicle (though we do have payments), eat leftovers, buy in bulk, cook and eat at home etc. So while I really do find strength in your posts, the light at the end of the tunnel, if there is one, is still very dim….
When those dim times come, for me it seems to help to look back at where I used to be. If I start comparing myself to other people, that’s where I totally get messed up. But if I just focus on how far we’ve come, then my hope is renewed. We’ve come this far…and we’ll keep on trucking. 🙂
Well said! they do say comparison is the thief of Joy or something like that.
At least there is some light :)better than total darkness.
That’s an excellent quote!
Britny, be encouraged that you are aware of the situation and trying to get it in-hand, and that you aren’t going deeper into debt!
Look up “debt snowballing” or “debt rolldown” (Barry may have done a post on this already?), but basically, it’s figure out what your minimums are right now, and never pay a lower total dollar amount. Focus on the smallest debt and give ANY extra that you might have towards paying that sucker off, and when it is gone, roll down or snowball that amount to the next one. One reason with the thought of paying down the lowest one first: you’ll get a sense of accomplishment (rather than picking the one with the highest interest rate which might have a higher balance and therefore take longer to pay one off), and sooner have more to snowball into the total repayment figure you use every month.
Also a note of encouragement: the numbers on paper are always scary when you first put them down–you look at them and think to yourself, GOOD GRAVY, THIS DOESN’T WORK! But somehow, it’s been working. Just know this: it often takes several tries to find the system that works for you–I know it has for our family. Just keep your commitment and keep trying, trying, and trying again. YOU CAN DO IT!!!
🙂 Thank you for the note of encouragement Dani! I did write about Debt Snowballs (http://www.stacymakescents.com/living-debt-free). It’s always nice when people who have been there can encourage others who are there right now.
Hmm, seems I can’t reply to Stacy’s comment to my comment LOL
Anway, we’ve tried snowballing, and tried it again and again and again… And I THINK that THIS time, it’s going to stick. We’ve been at it for 3 months, and already paid off two credit cards. We got a little creative, and moved some balances around and are now paying zero interest on a $5000 balance (will be zero until November 2013), and then any balance left on it at that point will be rolled over to a 4.5% LOC (not HELOC) that we have.
We are fully committed this time (the internet billpay is set up to pay automatically, and every time we zero one out, I go in and immediate move all the same payments that were being made to the focus debt to automatically go to the new focus debt–no “forgetting” to write the check!), and are feeling blessed in the knowledge that if hubby needs to take some time off work, or even a considerable step down in pay to go back to college, that we’ll be able to readjust if necessary, and still be able to keep paying down bills. I don’t know why this time is different, but it really is working for us this time around–maybe experience makes it better. I wish it had worked the first time, but it didn’t; the important thing is that we tried again, and now it is working for us.
I usually say: if at first you don’t succeed, give up and try something else. LOL But that doesn’t apply here. Good job!
Hello, I discovered your blog a few months ago from a pin on pintrest. I am so thankful! I have been blessed by your teamwork and encouragement in everyday real life. Right now my husband and I are trying to get a float. We had school debt and our house until last year. We were making progress and feeling good. Then as baby #3 got closer I wanted a van. My dad let us borrow some money and a few months later we had paid him back but the van needed some stuff so it went on a credit care. A tail spin and a year later our goal is to pay a little extra each month (card is interest free until April) and hopeful to use tax return to wipe it out. Then to get rid of school loans in next 3 yrs. thanks for what you do. Hope Stacy has fun at her conference.
I’m having a great time with my blogging buddies! 🙂 Kick out those school loans! Woot! Woot!
Me and my hubby have been saving for a little while now we have our emergency fund, our car fund, our goal now is a house to save $400 a month and anything extra that we can throw into it. My goal is to pay cash for a house but we will see what God’s plan is for us first.
GREAT JOB!!!! 🙂
I would really love some help getting myself debt free. You see I was left with a mountain of debt, owed to the IRS. My late husband didn’t pay two years of taxes and I didn’t know it. When he passed I got the debt. I have been working with a lawyer to help me and it has been going on since 2008.
I’ve also accumulated debt with credit cards and I owe on my vehicle. I would love, LOVE to be debt free. My goal is to try and pay off my smallest credit card at the beginning of the year. Why am I waiting? I need to buy Christmas for seven kids and two grandkids. I am also waiting to hear any day now if the IRS has accepted my offer. Fingers crossed, they will. After they get their money then I can concentrate on getting myself debt free. I am trying really hard to make my social security that I receive on my children go a really long way. I could use any help at all from you or the readers. I’m wanting so much to live debt free and try to live like God says we should. Thank you.
As you know, there’s not much you can do while you’re in the middle of things with the IRS. As such, hang on! When that mess is over, you can make a plan that will get you where you need to be. If you’re not already, make a budget every month and stick to it! The rest is just methodically living on less than you make and doing your best to make your money go as far as possible. I’m sending you an email as well that will give some additional input.
Thanks for this post! We are currently at a place in our lives where saving money, any money, is not an option. However, we have a plan in place for when we are done with this season to start saving money. Thankfully, we do not have any debt currently, no car payments etc. We are racking up the debt right now, though, as we are living off of loans while my husband is in medical school. The medical school system, like most higher education systems, is broken and just sucks up the money. We look forward to paying down our med school debt as quickly as possible once my husband is done with school!
Quickly is the best way to do it! Kick it OUT! 🙂