By John Patrick Foley, CFP®, ChFC®
My wife and I had some friends over for New Year’s Eve and one point we spoke about our resolutions and goals for 2016. Most of the comments I heard were “I don’t like making resolutions”, “They never work for me”, or “I don’t know where to start”. The friends who did make resolutions made ones that appeared to be very vague like “I want be healthier” or “I’d like to save more money.”
It dawned on me that perhaps the main issue might be that people are just not good at making resolutions or goals for themselves, or simply do not know where to start. When I create goals for myself, both personally and professionally, I like to use the SMART mnemonic – Specific, Measureable, Attainable, Relevant, and Timely.
Specific. The more specific you can be with your goal, the better. When first starting out, however, it is ok to begin with a general goal and work from there. For example, let’s use a goal I had mentioned earlier of “I want to save more money.” Next, you want to ask yourself the six “W” questions we all learned in elementary school when writing a report: Who, What, Where, When, Which, and Why. Who – Is anyone else helping me save more money or am I doing this on my own? What – Be specific about how much you want to save and perhaps even for what reason – retirement, college, emergency funds. Where – Identify where you want to save. Will you be adding more to your 401(k) or to your checking account? When – Establish a realistic time frame or deadline for when you want to achieve your goal. Which – What will you need to do in order to reach your goal? Identify any obstacles that you may face as well. What might get in your way? Why – Why is saving more money important for you to achieve? What will you do with the money you saved?
Measureable. Create your criteria for success and ask yourself, “How will I know when I have accomplished my goal?” Your criteria can be quantitative (numbers-based like saving $12,000) or descriptive (describing a certain outcome like being able to go on a second honeymoon). I find it easier to put concrete numbers to my goals so I know if I am on track or if I am falling behind. Keep a record of your progress – break down your goal to a weekly number, for example, and track your progress against this.
Attainable. Here is where you want to make sure that your goal is something that you can achieve. How realistic is the amount of time you gave yourself to reach your savings goal? What challenges might you face? You also want to assess your commitment level. Are you willing to cut back on other expenses today, if needed, to reach your savings goal? If not, perhaps, you may want to readjust your goal to fit your circumstances.
Relevant. This step aims to ask yourself whether your goal will be fulfilling for you as an individual. Are you looking to save more because you were told you need to or because you really want to? How does this goal fit into your other goals? Conflicting plans can create some problems. Is saving more in your 401(k) going to drain your emergency or college funds? If so, make some adjustments as necessary.
Timely or Time-Bound. Set a deadline to when you want to reach your goal. Without a time-frame there is no sense of urgency behind reaching your goal. Do you want to save $12,000 by year-end, for example? Once you have a timeframe, you can then break down your goal into smaller, manageable steps or benchmarks. Saving $12,000 in a year could be broken down to a benchmark of $1,000 each month, making your goal more manageable. Now that you created your benchmark decide when you want to check your progress.
With your SMART goal set, you are now on your way!
Need help in creating a SMART goal? Trying to find a balance between your different goals? We can help! Feel free to reach out to us using our Contact link found on the top of this page.