This time of year, most Americans begin thinking about New Year’s Resolutions. They typically range from weight loss and healthy living to career advancements and more time with family. And, if you are like most Americans, you are thinking about financial resolutions as well.
The challenge with resolutions is that they are quickly forgotten. The gyms are busy for a month and you give up the junk food for a couple of weeks. You tell yourself this time will be different but how many years have you said that for? With the struggle we have in keeping our New Year’s Goals, what is the key to success? The secret is having a well-crafted strategy and it starts with SMART Goals.
The first step in achieving your financial resolutions is to break down your goals and become very specific. It’s not enough to say you want to save more money or pay of debt. We all want that. If you are to have any level of success, it’s much better to say ‘I will pay off $5,000 in debt by December’ or ‘I will save and invest $500 per month every month.’
Make it Measurable
Goals need to be measurable to work. If you do not track them, how will you know you are on the right path? When it comes to measuring goals, break them down even further. Rather than saying ‘I will pay off $5,000 in debt by December’ try ‘I will pay off $400 of debt per month.’ Smaller, measurable goals will keep you motivated.
Make it Attainable
If a goal is too large and unobtainable, it can be very de-motivating. Sure, it is important to create goals that will stretch you but, make them too large, and you will tend to give up early. An easy idea is to look back at what you have accomplished financially in the past twelve months to get a sense of what it possible moving forward.
Is it Relevant?
Money is so much more than x’s and o’s on a spreadsheet. Money represents all that you have created in this life and all that you hope to accomplish. Rather than shooting for a large account balance, think about what I refer to as your True Purpose for Money. This is what is more important than money itself. Is it the ideal retirement, time with family, or the realization of starting a business? Find out what it is for you and include it in your goal setting.
Is it Time-Sensitive?
Finally, you should give yourself a deadline for completing your goal. Parkinson’s Law is summed up in this way: The amount of time which one has to perform a task is the amount of time it will take to complete the task. In other words, do not procrastinate-get started today. Remember to keep the timeframe of the goal manageable. If you feel like you can reasonably accomplish your savings goal within six months, do not wait the entire year before setting a new goal.
We have all made financial resolutions in the past. The question is, can we keep them. The answer is typically ‘no’ but by creating SMART Goals, you will be well on your way to a wealthy and prosperous new year.