Want to improve your finances? Set realistic money goals for the new year.
During this time of year, we all take a step back and think about what has been accomplished during the past year — and what we hope to accomplish in the new year. Indeed, many of us set several goals for the coming year, perhaps a balance transfer from your currently outrageous credit card company to a much more economical one, but usually involving weight loss and money. I know those are almost always my perennial goals — something about money and something about weight loss.
Even if you don't keep your New Year's resolutions, they have some value. However, consider setting SMART goals to increase your chances of keeping your financial resolutions.
What are SMART Goals?
If you are interested in creating goals that are more likely to help you accomplish something, there is a formula you can follow: SMART. This is an acronym meant to help you identify the characteristics of achievable goals:
- Specific
- Measurable
- Attainable
- Realistic
- Timely
The idea is to create a plan that urges you toward accomplishment by setting specific and measurable actions to help you achieve your goal and encourage you to look at attainable and realistic goals within a certain period. Let's be honest. You won't pay off $15,000 in credit card debt within six months. Setting that goal is unrealistic — and will only fail.
As you begin setting your money goals, consider the characteristics of SMART goals. Your financial goals should help you pinpoint what you want to accomplish with your money. It's about creating a timeline and breaking down your goal so that you can make progress and measure your success at different points in the timeline. Whether trying to max out your retirement account contributions, save up for a home down payment, buy a new car with cash, get rid of debt, or cut your monthly expenses, the SMART framework can help you get started right. Putting down a plan (on paper) will also provide step-by-step instructions for reaching your goals.
Scale Back: Choose One Money Goal at a Time
Another way to be smart about your money goals is to work on only one at a time. You don't have to throw out a list of financial goals at the beginning of the year. Instead, consider your most important money goal, then focus on that one financial goal first. By focusing your efforts, you might be able to get more done — and faster — than you imagined. Then you can use the SMART framework to tackle your next financial goal.
You can set new goals throughout the year; there's no reason to limit yourself to financial improvement at the beginning of the year. You should be in a state of perpetual progress. There is always something to work on. Use SMART to help you crystalize your goals and tackle them individually. And, if you get off track, take a deep breath and start over again. You can always renew your commitment to better finances, no matter the time of year.
