The SMART Method for Effective Goal Setting
Setting goals is an important part of any successful financial plan. They help you to know where you are going and how best to get there. Setting goals can also be a great way to establish communication about financial topics between a husband and a wife. However, some goals may be “better” than others. What I mean by that is that some goals may be more achievable than others. For example, some goals may simply be too vague, broad, or difficult to realistically achieve. Because of these difficulties, the BYU Personal Finance Website suggests the SMART method for setting goals. SMART stands for specific, measurable, achievable, realistic, and time-bound. Let’s take a closer look at each of these attributes.
Specific–Goals that are vague or unclear are not going to help you. Also, goals that are too broad are less likely to be accomplished. For example, the goal “I am going to become more financially literate” is too broad of a goal. What defines “financially literate”? How will you know when you get there? A better goal would be “I am going to understand the different kinds of retirement accounts by the end of the month”. This goal is much more specific and, because of this, helps you to know when it has been achieved. It also helps you to focus your energies on an achievable goal.
Measurable–A measurable goal is a goal that allows you to track how far along you are toward achieving the goal. If a goal is not measurable, you will never know if it has been achieved. For example, the goal “I am going to reduce my debt” is a worthy goal, but it is not very measurable. A better goal would be “I am going to reduce my debt by $500″.
Achievable–Achievable goals are goals that are important to you and that you know you can accomplish. They utilize your strenghts, interests, and talents. Basically, they are goals you WANT to accomplish. A good example of an achievable goal would be “I am going to save up $20,000 for a down payment on a house”. You have always wanted this house and it is very important to you to save up this money. For this reason, this goal is achievable.
Realistic–Similar to an achievable goal, a realistic goal is a goal that you can accomplish. To set a realistic goal, you need to analyze what you can actually do during your desired time period. A goal that is too difficult will not help you much. For example, the goal “I am going to save up $100,000 this year” is completely unrealistic if you only make $50,000 per year. I am not saying to only make goals that are easy, but you should make sure that there is a way to accomplish the goals you set.
Time-Bound–One of the most important things to do to make your goal effective is to set a time frame for it. Without a time frame, a goal does not mean much. For example, the goal I mentioned earlier about saving $20,000 for a down payment on a house would be useless if you used your entire life to accomplish it. However, if you decided that you would save $20,000 within five years, that goal would actually mean something to you. It gives you a deadline and helps you to understand how much progress you have made toward your goal. The best part is that once you have achieved that goal, you have time to set a new goal!
Have any of you had any success with the SMART method for setting goals? Do you have any other suggestions for effective goal setting? Let us know!
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I’ve made a goal to pay off $45,000 of student loans and cash flow the rest of my MBA degree in the next two years (by June 2011). It fits the SMART method but it still remains to be seen if I can discipline myself to stay on our budget for two years!!