If you don’t know where you are going, then you are probably not going to get there. If you were driving your car but did not have a destination in mind, you would be driving around in circles or just driving from place to place. The same thing applies to money. If you do not have goals, then you will spend your money without accomplishing much. You may acquire a lot of “stuff” but a lot of it may be considered useless.
Goals are like a plan. If you have a plan, then you are more likely to accomplish what you set out to do. There is an old adage that says, “People don’t plan to fail, they fail to plan.” I like to say that people don’t plan to retire broke, they fail to plan for retirement. In a lot of cases people don’t plan to graduate with tens of thousands of dollars in student loans; they fail to plan to finance their college education. I believe that you are less likely to fail if you have a plan.
We are going to discuss four different types of goals: Short Term, Mid Term, Long Term, and S.M.A.R.T.
Goals.
Short-Term Goals are goals up to 12 months.
You may have a goal in mind that you want to achieve in the next 12 months. It may be to save a certain amount of money to attend an event, to go on vacation, or to purchase an outfit. These are all examples of Short-Term Goals.
Mid-Term Goals are 1 Year – 5 Years.
There are some things we desire that are going to take a little more planning than is required for our Short-Term Goals. Unfortunately, some people try to achieve these goals without doing the necessary planning and they end up not achieving their goals or they achieve their goals but at a very high cost. Sometimes they use money allocated for bills such as the rent, mortgage and/or car payment to get things and end up in a big financial bind. Examples of Mid Term Goals could be the purchase of a car, the purchase of a house, going on an extravagant vacation, or attending school to get a degree or an advanced degree. None of these purchases or goals should be taken lightly.
Long-Term Goals are more than 5 Years.
Depending on your financial situation, some Mid-Term Goals for some should actually be Long Term Goals for others. If you have a mountain of debt, it may be wise to decrease or to eliminate your debt before purchasing that home, pursuing that advanced degree, or going on that extravagant vacation. Most people have dreams of retiring from working someday. If you do not have a goal to retire and an action plan to reach your goal, then it may remain a dream. Retirement for many people is more than five years away. Unfortunately, many people see it as something that is just going to happen in the future and never make financial plans to retire. They continue to spend but do not save anything for retirement. Retirement is a major Long-Term Goal that most people can identify with. However, if you do not make it a goal to retire then you may end up working well into your golden years. Not because you want to do so but because you have to in order to survive.
S.M.A.R.T. Goals
S.M.A.R.T. is an acronym for setting goals. S – Specific, M – Measurable, A – Achievable, R – Relevant, T – Timely. Many people have good intentions when they make goals but they set themselves up for failure because they do not make S.M.A.R.T. Goals. Very popular goals are: I am going to start saving this year or I am going to decrease my debt this year. These are honorable goals but are very general. Therefore, the likelihood of achieving them is very minimal. Examples of S.M.A.R.T. Goals for these are: By December 31st I am going to save $500 by saving $50 per month and by December 31st I am going to decrease my debt by $1,000 making an additional payment of $100 on the debt with the highest interest rate. Both of these goals are Specific ($500 and $1,000), Measurable ($500 and $1000), Achievable ($500 and $1,000 by December 31st), Relevant ($50 per month and $100 per month will help you to reach your goal depending on when you start), and Timely (by December 31st). The chances of reaching these goals are greatly increased by making S.M.A.R.T. Goals. Feel free to use these S.M.A.R.T. Goals.
Action Plan:
Use the Planner on the next page to make a S.M.A.R.T. Goal related to one or more of your financial goals.
SMART Goal Planner
Today’s Date: _______________ Start Date: _______________Date Achieved: ______________
Goal: _________________________________________________________________________
Verify that your goal is SMART Specific: What exactly will you accomplish? _____________________
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Measurable: How will you know when you have reached this goal? _____________________________
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Achievable: Is achieving this goal realistic with effort and commitment? Have you the resources to achie ve this goal? If not, how will you get them? _________________________________________________
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Relevant: Why is this goal significant to your life? ____________________________________________
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Timely: When will this goal be achieved? ___________________________________________________
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