‘SMART’ Goals prevent derailment of financial plans

Feb. 19, 2013 @ 12:40 AM


You may use the “Your Financial Action Plan” fact sheet from UFL Extension (website below) to develop a budget and goals. You’ll need to fit your written goals into your budget.

Now plug some of your high priority goals into your budget. SMART Goals will make them more attainable. SMART Goals are:

S - Specific — You know exactly what you want

M - Measurable — What is the cost/how much will you need to save each month?

A - Actionable — What actions will you need to take?

R - Reachable/Realistic — Can you realistically reach this without giving up?

T - Time — Achieve by what date?

For example, an ineffective goal: I want to buy a house.

SMART Goal: I want to buy a house with a value of up to $80,000 within six years. I will save $20,000 for a down payment and closing costs by saving at least $277 a month.

Now you can work the monthly amount required to save into your budget. Repeat the process with other goals. If money is tight, you’ll need to identify unnecessary expenses. Reduce current spending to be redirected towards the goals. For example, if you buy lunch out everyday, carry your lunch most days instead.

Save money from every paycheck, even if it is a small amount. The habit of regularly saving is more important and beneficial than the amount saved. Once the habit is started, increase your savings. Many successful savers follow the Pay Yourself First philosophy — contribute to savings before paying bills.

Resist peer pressure from family, friends and the media to spend. When you cave in to pressure to spend on items of lesser importance to you, you are giving up future needs to satisfy immediate wants. For greater success, treat savings for financial goals as a “fixed expense.”

If you think you don’t have any money to save, try this exercise: Start with putting a penny in a jar. Each day, double the amount so, the second day, you’ll add 2 cents, third day, 4 cents, fourth day, 8 cents, fifth day, 16 cents, etc. Now, if you could keep doing that, do you know how long it will take to accumulate $1 million? Stop when it gets too rich for you and start all over again with one penny. Periodically, put it in a savings account for goals and emergencies.

It really is all about choices. We all have to make them and we all have to live with them. Not making a deliberate choice is a choice, too! Just like Dorothy following the yellow brick road, follow your plan, checking on your progress periodically.

Oh, by the way, it takes 28 days of saving as above to surpass $1 million.




• The Importance of Financial Goal Setting; njaes.rutgers.edu/sshw/message/message.asp?p=Finance&m=174

• Barbara O’Neill, Ph.D., CFP, Extension Specialist, Financial Resource Management, Rutgers Cooperative Extension, 2/11

• Your Financial Action Plan: edis.ifas.ufl.edu/pdffiles/FY/FY37300.pdf, 10/09