The long weekend has past and I’m not sure about your household but in ours, we start thinking about what to do, what activities to take part in, and depending on the weather, what flowers to plant. And all I can hear in my head when my husband and I are discussing things is what the cost is and have we budgeted for it? This leads me to think about goal setting around our finances.
Goals are typically broken into timeframes; short-term (1-12 months), medium term (1-5 years), and long term (5+ years). Anyone can set a goal; we do it all of the time.
Goal setting examples
- Save money
- Travel
- Save for my children’s education
- Renovate my kitchen
- Save for retirement
There’s a great quote by Antoine de Saint-Exupéry who said “A goal without a plan is just a wish.” The “goals” listed in the last sentence are just wishes at this point because there’s no substance to them. But if we put a little bit of elbow grease into it, we can create some achievable goals. We do this by making S.M.A.R.T. goals.
Specific
Measureable
Achievable
Realistic/Relevant
Timed
When we make our goals specific as opposed to generic we’re more likely to achieve them. Instead of saying “I want to save money”, we could say “I want to save money so I can go to Italy.”
Let’s take another step and make it measureable so for financial goals, this is when the amount is relevant. So we add the cost to our goal of vacationing in Italy (e.g. $5000). We can make the goal achievable by breaking it down by month, pay cheque frequency (e.g. bi-weekly), or by week. So, expanding on our goal of Italy, if we put $192 into a savings account bi-weekly, in one year, we’d have enough to go.
The question we need to ask ourselves is whether that is achievable and realistic. If it is then we can set up an automatic transfer from our chequing account to our savings account for Italy.
If however it isn’t realistic to put that much money aside every payday, then we either need to extend our goal beyond one year or we change the type of trip we’ll take (e.g. instead of four star hotels, we can use a hostel). And finally, once we set out the amount of money we’re going to save, we need to be comfortable with the time frame. Is going to Italy in one year realistic and does this work for my schedule?
“A goal without a plan is just a wish.”
By answering all of these question we have created a S.M.A.R.T. goal – we’ll put $192 into savings bi-weekly so that we can go to Italy, knowing the trip will cost up to $5000. We’ve taken the guesswork and vagueness out of the equation and we know with our budget, that we’ll be heading across the pond next spring.
It’s my experience that if I want something bad enough, I’ll find a way instead of an excuse and when I create S.M.A.R.T. goals, I find that I’ve taken all of the mystery out of it and made it bite-sized and achievable so that I can focus my energy on planning and attracting my goal.
Until our next chat, what’s one positive thing you can do today to help your financial future?