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Can you believe we are less than 30 days away from the start of a new year?!
I don’t know about you but I love bringing in a new year (wait – is it ringing in or bringing in??). Anyway, a new year gives you a sense of hope that all of your mistakes are in the past and you can start over with a clean slate. You can set new goals, start new hobbies and my favorite you can set New Year’s goals also known as New Year’s resolutions!!!
Two years ago, my goal for the New Year was to get my finances in order! I created a plan, made the necessary adjustments and so far I’ve stuck to it. In fact, I’ve been going strong since January 2017.
New Year’s resolutions (or goals) are popular during this time of year. It’s guaranteed that someone around you will make reference to a resolution between now and the New Year. Think about it, we often talk about resolutions and we expect to attain them. However, we never discuss the “logistics” of ensuring that we achieve those goals. Business Insider states, 80% of New Year’s resolutions fail by February! Eighty percent!!!!! That’s a startling statistic! It amazes me how we’re excited about the unlimited possibilities of a new year, but in about 7 days in that excitement becomes non-existent.
What happened??
Well for starters, I think we set goals that aren’t specific. We have high ambitions and set awesome goals, then suddenly everything falls flat.
This post will introduce you to SMART goals. SMART goals will provide you with the framework of how to implement action-packed goals. As I provide the framework, you know that I have to tie it back to finance!
Let’s get into it!
What are SMART Goals?
SMART is an acronym that you can use as a guide assist you with setting goals. According to Mindtools.com and FitSmallBusiness.com, the criteria for SMART goals are as follows:
- Specific (simple, sensible, significant) – The “S” helps you to determine the who, what, when, where and why.
- Measurable (meaningful, motivating) – The “M” involves metrics or data that will help you to keep progress.
- Achievable (agreed, attainable) – The “A” allows you to identify if you can accomplish these goals based on your skill set.
- Relevant (reasonable, realistic and resourced, results-based) – The “R” indicates if this goal is worth your time.
- Time bound (time-based, time-limited, time/cost limited, timely, time-sensitive) – The “T” is your timeline or your target date for completing the goal.
Now that you know what SMART goals are, I will apply that methodology to the five financial goals that will allow you to have a prosperous new year!
1. Create A Budget
When I graduated from college, I left with six-figure student loan debt. Yep, you’ve read that correctly. Three months after graduation, I started a job where my take-home pay was roughly $40,000 annually. Bills were paid on a consecutive basis but my spending was out of control.
As I created my budget, I merged SMART goals with my financial goals. At the time, my goal was to create a budget that will cause me to stop living paycheck to paycheck and build an emergency savings fund of $1,000 by the end of the year!
How can I make this a SMART goal? Let’s break it down.
Personally, I’ve found that writing things down and being SPECIFIC helps me to achieve my goal. I can MEASURE my progress on a daily basis by monitoring my cash inflow and outflow. As I monitor my spending, I can see if this goal it’s ACHIEVABLE. Meaning, if I find that I am cutting it close to my spend limit, I can decide if I can avoid that unnecessary purchases. If I cut back on my spending, will I be able to come in under budget? Couponing looks good right about now. Although it’s achievable for me to come in under budget, is this budget REALISTIC for me? I live in a two-person household with one child. Will I be able to make ends meet with a reduced grocery budget? Can I achieve this goal within a year’s TIME?
Applying the SMART goal framework helps to turn a goal from a vision into reality. The framework here is here to help you, all you have to do is stick with it.
2. Stop Living Paycheck to Paycheck
Congratulations, you’ve made a great decision! For those who are sitting on the fence, close your eyes and think of me as your elementary school P.E. coach yelling into a bullhorn “what are you waiting for”!!! Was that convincing?
Do you like counting coins or pinching pennies? I hate it! I’ve been there. I’ve experienced hard times. I can recall being three days away from payday and I have less than $10 in my bank account. I don’t want to spend any money because of bills that are pending in my bank account. The last thing I need right now is to have my account overdrawn.
What will it take for you to stop those bad habits?
Be SPECIFIC and understand why you want to stop? Are you ready to have better control of your finances? MEASURE your progress, what will it take for you to meet this goal and how do you expect to get there. What small changes can you make now that will have a big impact later? Are you able to ACHIEVE this goal?
Are your bills the creating an issue for you. If they are, call the creditor and see if they will allow you to change your payment due dates to accommodate your paydays. Be REALISTIC about your cash inflow and outflow. If you cannot afford to purchase something, don’t do it. Placing yourself in financial jeopardy is rough if you can avoid it – do it! Making these changes take TIME. Don’t expect these changes to stick immediately. Give it time.
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3. Create an Emergency Fund
So far we have identified three heavy-hitting goals. Now here’s where the hesitation comes in. You have created a budget, you’re working towards removing yourself from living paycheck to paycheck and now you want to create an emergency fund with $1,000.00.
Is this possible? YES!
A few years after I was laid off from my job, I worked as a substitute teacher. I was making $13.00 a day and I worked on an inconsistent schedule. There were days when I was asked to work half days and there were days when I was at home because I didn’t have any work. My income was inconsistent.
In the midst of having a tight income, I enrolled in Financial Peace University. I learned about Dave Ramsey’s 7 Baby Steps. Step one was to save $1,000.00. When I heard this I balked at the idea like, $1,000. I don’t have that.
Well one day, I woke up to two flat tires. I took my car to Tire Kingdom and they repaired them for me. One week later, the other two were flat and I had to pay for two additional tires. My initial thought was If I had an emergency fund, I could have used those funds. This was a tough pill to swallow, it was at this moment I realized I needed to have an emergency fund.
Be SPECIFIC – I want to create an emergency fund that has a balance of $1,000. MEASURE your progress, what steps will it take for you to meet this goal and how do you expect to get there. I will take $38.50 out of my biweekly paycheck and deposit it into a savings account. I will ACHIEVE this goal by setting up automatic transfers in my bank account so that on my payday the funds are automatically transferred. Saving $1000.00 may seem like a stretch but I had to make this goal REALISTIC by breaking the dollar amount down and making it manageable based on my income. TIME – I want to have $1,000 saved by the end of the year.
4. Pay Down Debt
I wish I could insert a sound bite right here. If I could it would be the sound effects from the movie Jaws. Everyone knew Jaws was just about to attack before he did the infamous music would start to play. Am, I dating myself right now? Don’t worry, I’m a millennial so I’m not that old. HA!
Back to the subject at hand!
Paying down debt takes a lot of commitment. In fact, it’s an awesome thing to do and DO NOT let others make you feel a certain type of way because you want to achieve financial independence.
One day as I researched various credit cards and information pertaining to paying off debt, I found an article that contained startling statistics about credit card debt. According to the article, did you know that consumers have paid $104 Billion in credit card interest and fees? This is 11% more than what was recorded in 2017 and 39% more than what was recorded in 2013. Houston, we have a problem!
I used my credit card frequently. In fact, when my income wasn’t enough to make ends meet, I relied on using my credit card. As a result of my actions, I placed myself in credit card debt. In fact, I have dug a pretty deep hole.
In order to pay down my debt, I created a SMART goal.
A SPECIFIC goal is to pay off three credit cards by the end of the year by making consecutive monthly payments of $500.00. I MEASURED my progress by cutting down my expenses in other categories and applying more funds for my monthly payments. I ACHIEVED this goal by creating subgoals in the Mint phone app. The app would send alerts to see if I was achieving those goals. REALISTIC by breaking down the total dollar amounts to making the monthly payments manageable based on my income. TIME – I want to have three credit cards paid off by the end of the year.
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5. Stop Excessive Spending
In order for your SMART goals to work, you have to stop spending excessively!
You CANNOT make changes in one area and not all areas.
You have to change your spending habits.
The society that we live in pressures us to spend money. Advertisements are everywhere. They’re sent to you in through emails, we see them showcased on city buses, television and radio commercials, and even electronic billboards! I saw a billboard just the other day that read extended mall hours just in time for Christmas. There are billboards lined up on the highways advertising extended mall hours, SMH!
With all of the pressures that are in front of you, you have to learn how to avoid it and not fall into it.
A SPECIFIC goal is to stop spending excessively. If you do not have a designated category in your budget for these items, don’t waste your time spending money. MEASURE your progress by sticking to your budget. Follow your budget plan, see how much money you save by avoiding unnecessary purchases. IIf it works, try it again for the following month. If you have ACHIEVED that goal – you are on your way to saving money which can assist you pay down your credit card debt and build up savings in your emergency fund. Be REALISTIC by being honest with yourself. TIME – I want to have $1,000 saved by the end of the year. To meet this goal, you have to put the card down. Don’t place yourself in a situation where you will spend money.
Once you have implemented these 5 SMART goals in this new year. I guarantee that you will end this year feeling a lot like this……..
Saving money is often frowned upon because people make it seems like it’s a long drawn out activity that you just have to do. In the end, if you want to have a stress free life and have financial freedom, try these steps.
I can guarantee you that they will make life so much easier!
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