SMART Financial Goals – Part Two?

Answer 1

Last time I spoke about the mnemonic SMART, which is an acronym that lays out some criteria for setting more effective goals. These criteria can help us set better goals, whether they be goals for things we want to accomplish in our own personal development, at work, or with our personal finances. The letters each stand for something:

S - Specific

M - Measurable

A - Attainable

R - Relevant

T - Time-bound

I went over the Specific and Measurable criteria last time, so let’s dive into the rest.

Each goal should be Attainable. I know some self-proclaimed self-help gurus that admonish that we should always set goals that shoot for the stars. The problem with such astronomical goals is that they really aren’t realistic in any way. And setting unattainable goals is a recipe for perpetual failure. Rather than shooting all the way for the stars, perhaps it’s best to remember that you can set incremental goals. If you really want to reach the stars, take it a light-year at a time.

Also, our goals should be relevant. It’s easy to avoid doing the work that really needs done by focusing on stuff that’s tangential but insignificant. Make sure your goals really are focused on your overall mission and values. This is the reason that a corporate mission statement and vision statement are so important for folks in management circles – they serve to keep us on target. The Wikipedia entry on SMART criteria ( http://en.wikipedia.org/wiki/SMART_criteria#Specific ) gives a funny example of a bank manager setting a goal to "Make 50 peanut butter and jelly Sandwiches by 2:00pm." While this goal does meet the other four criteria, it is not relevant to the mission of the bank. If your goal really is to get out of debt, don’t think that setting a goal to review your insurance policies by the end of the month is going to get you closer.

Every goal should be time-bound. If you say you want to pay off your debt, that’s not a goal – it is a wish. If you say you want to completely eliminate your debt by the end of the year then you are getting somewhere. This allows you to break down the goal into manageable (and measurable) parts. You can say that if you have $12,000 of debt at the beginning of the year then in order to reach your goal you will need to pay down $1,000 each month of the year in order to achieve your goal.

Following these SMART criteria not only help to keep you on target to achieving your financial goals, they help define actionable steps you can take to get where you want to go. So when setting your goals for your personal finances, be SMART about it.