Setting SMART financial goals: How to crush 2020 Resolution season

Is it too early to post about goal setting? Talking about goals before December 26^th is a bit like decorating for Christmas before Thanksgiving isn’t it (no judgement, but y’all Christmas nerds are weird).

But when it comes to goals I just can’t help myself! I don’t just want to set goals, I want to crush them.

Goal setting is basically my love language.  I love setting goals, both financial and non-financial. So much so that I actually created a local goal setting group!

Some of my favorite past financial goals:

*Became completely debt free! (achieved in 2014, at the age of 27)

*Completed a 3 week long full “No Spend” challenge (achieved in 2017)

*Hit a 70% pre-tax savings rate, which translates into an 87% after-tax savings rate (achieved June 2018)

Some of my favorite past non-financial goals:

*Have completed two marathons (achieved in 2008 and 2016)

*Learned to decorate cakes so I could make my own wedding cake (achieved 2011)

*Wrote and performed a 5 minute stand-up comedy routine (achieved 2019)

We all have things we want to accomplish.  I believe that not all goals are created equal and that there are methods that we can use to dramatically increase our likelihood of goal achievement.

S.M.A.R.T. Goals

I like to use the SMART goal setting framework.

This method was created in 1981 by George Doran and has become the “goal standard” 😉 for both business and personal goal setting. SMART is an acronym for specific, measurable, attainable, realistic and time-bound.

Disclaimer: You can and should decide for yourself what goals you want to set.  This is simply a method to re-frame or tweak the goal in a way that increases clarity, increases commitment and therefore increases success.

Warning: I am going to explain the last two out of order since it just makes more sense to me and because I personally think SMATR or “smatter” is funnier to say.

S. Specific

“Save more money” is one of the most common new years’ resolutions set each year.  And unfortunately, this is not a very specific goal.  It could mean saving $1 more and it could mean saving $10,000 more since both are technically “saving” money. 

You can never really accomplish vague goals like these because the outcome is undefined. You might save $500 and instead of being happy that you have saved “some money” you still feel like you should be saving more.

Questions to ask during goal setting:

1. What is it I really want to accomplish?
2. How can I make the goal more specific?
3. How will I know that I have accomplished the goal?

M. Measurable

At every point in the journey to accomplish a goal, you should know exactly how much you have accomplished and how much you have left to go.

The late Peter Drucker, the “founder of modern management”, said:

“What gets measured, gets managed.”

If you aren’t tracking and paying attention to the goal you are less likely to accomplish it. Admittedly, some goals are easier to measure than others. For example, finance goals tend to be easier to measure than fitness goals since most of the time you can determine dollars in and dollars out, unlike fitness goals where you may have to rely on pounds lost. Pounds lost isn’t a great indicator since you don’t really know if you just lost water weight (instead of fat).

The goal here is to make the goal measurable and then actually measure it. So many people apply the “set it and forget it” method to their goals which is why so many people fail their resolutions by February.

Questions to ask during goal setting:

1. How can I measure this goal?
2. How will I track my progress?
3. When will I measure and record my progress?

A. Attainable

My second biggest life goal that I promised myself when I was a kid was that I was going to get my brothers out of financial hardship too. While it was a sweet goal to set, I had no business setting it.  This goal was completely not attainable for me since I have no control over the decisions that my brothers choose to make. When setting goals, it is important to focus on areas over which you can control, which is only your own actions and decisions.

Now it is unlikely that every goal you have can be 100% completed by you and you alone. Although I sometimes wish I was an island, I’m not, I sometimes need help and my decisions do sometimes affect others.

For example, you may need your spouse’s support to reduce household spending (read my last article here for tips on getting your spouse on board with budgeting) or you may need them to watch the kids for an extra hour that week so you can build your side hustle.

 Take this opportunity to consider your ability to attain each of your goals.

Questions to ask during goal setting:

1. Can I attain this goal by myself?
2. Who’s support do I need to attain this?

The purpose here is to identify the external factors that affect your ability to attain a goal and either coordinate appropriately or find a way to address the external factors.

T. Time-bound

Procrastination is one of the biggest threats to goal achievement.

I’m super guilty of letting procrastination derail my goals.  Even last year, I thought “I don’t need to start practicing doing a handstand in January, there’s plenty of time to practice.” And then of course, at the end of Q3 I started frantically practicing to the point where I hurt my wrist.

To combat this, it’s helpful to have milestones and deadlines for each goal you set.

It’s usually pretty simple to add a time component to goals. For example, instead of “I want to pay down debt”, you would state the goal as “I will pay off the $1,234 that I owe on my car by July 1^st.

Questions to ask during goal setting:

1. What is the earliest realistic deadline I could set for this goal?
2. When do I want to have completed this goal?

R. Realistic

This tip is described last because I think it ties into the Time-bound component.

Brian Tracy, the motivational public speaker and self-development author, has been known to say:

“There are no unrealistic goals, just unrealistic deadlines.”

I believe that long term goals can be and often should be grandiose. We want to dream big and push ourselves towards achieving greatness.

But I also believe that short term goals (0-3 year goals) should be broken down to smaller, more realistic sized goals.

For example, let’s say your goal is to cure excessive armpit sweating (firstly, thank you for fighting the good fight).

Is this goal realistic? Maybe. It’s hard to say if this really can be cured (I sure hope it can). But don’t let that stop you from going for the goal.

You would however want to set realistic short term goals to support the big dream.  For example, your goals could be to read 3 books about armpit biology and perhaps run 30 tests of chemical combinations to test their effectiveness against sweat.

When it comes to finance, I think that becoming a millionaire is a great long-term goal. But if you currently have a negative net worth, I would recommend setting smaller, more realistic goals for the short term. Even Bill Gates says “Most people overestimate what they can do in one year and underestimate what they can do in ten years.”

Make sure the goals you set are setting you up for success instead of disappointment.

Questions to ask during goal setting:

1. Is this goal realistic given the timeline?
2. Will I have the time to work on this goal in the next few months?

In conclusion

Take a little bit more time to add some clarity to your goals.  For optimal goal setting, be SMART about your planning!

For the comments:

Have you used the SMART framework before?

What goals are you most proud of accomplishing and were they “SMART” goals?

For additional reading:

https://www.dollarsprout.com/list-of-financial-goals/