Making goals is easy. Pay off debt, build an impressive emergency fund, and start investing — these tried-and-true goals come as easily as you can write them down on a list. Achieving them is a lot harder.
There are reasons why people live in debt, without emergency savings, and without investments. Putting a plan into action can be challenging if you aren’t sure what to do. But don’t worry. All this can change with the right attitude and knowledge. You can achieve these top financial goals by following the SMART method.
What is the SMART Method?
The SMART method is an acronym that stands for the five following words. Each one stands for a step in making your next goal:
All too often, goal-setters choose vague objectives that can be hard to track.
Take “paying off debt” as an example. Anyone can stand to pay off an outstanding loan or line of credit, but this ambiguous goal doesn’t provide you with any details about how you, in particular, will pay down the exact debt you owe.
The SMART method changes that by encouraging you to create clear, definable goals with distinct deadlines. These five words create a framework for setting practical goals that increase your chances of success.
What Does SMART Mean?
Still not sure how this method can help you achieve your goals? Let’s see it in action, assuming you want to pay off your loans.
This step aims to clarify your objective by setting a specific goal that clearly defines what you want to achieve. Don’t just use the word “debt”. Be exacting, like, paying down $5,000 of your line of credit balance.
For most people, $5,000 is more than they can produce in a month. You probably need time to come up with that kind of money. For a goal this large, you need to break it down into smaller steps.
Shattering one overwhelming goal into several tiny pieces can take some of the pressure off your shoulders. Rather than focusing on the $5,000, what do you need to do to save $100? Is there something you can cut from your budget to free up this cash? Can you sell something you don’t use?
This next step is a reality check for the previous two. Can you reasonably pay off the amount you want in the time you prefer without twisting your budget into knots? Consider factors such as your income, expenses, and any other financial obligations.
Paying off debt is often a sensible goal as it helps improve your financial health, reduces stress, and allows you to focus on other financial goals. But you also need to evaluate the likelihood you’ll stick with the plan that you’ve started to put together.
Be honest with yourself about whether you can stick with a budget. If not, you’ll have to restart the SMART method and tweak each step to find something that resonates with you.
Deadlines help people focus and get things done. Set a specific (and realistic) timeline or deadline for achieving your overall goal. For instance, “I want to pay off $5,000 debt within 12 months.” But don’t forget about your mini goals you set in the measurable step above. Assigning a timeframe to achieve these will help you stay on track.
By following this SMART action plan, you can stay focused, measure your progress, and work towards becoming debt-free in a realistic and organized manner. Remember to adapt your plan as needed, considering any changes in your financial situation along the way.