It’s that time of year where everybody is thinking about how much weight they want to lose, the debts they want to pay off, and other important financial goals and dreams in their lives. The question is, “How do you keep your focus past January?”
I believe that part of it lies in knowing the difference between a goal and a dream. Having just worked with my children on this, I’ll give you an academic example. If the long-term dream is to have college paid for with scholarships, what are the short-term goals that you need to achieve in order to make that a reality? Not turning in one homework assignment may seem irrelevant in light of the long-term dream, but, if the short-term goal is to make all As by turning in all assignments, you are more likely to keep your focus.
The same is true of your finances. If your long-term dream is to have a million dollar net worth, what steps do you need to take in the short-term future to make that dream a reality? It has been said that the best way to get rich quick is to get rich slowly, and we would agree.
We recommend using S.M.A.R.T. goals, which are
SPECIFIC – What do you want to accomplish?
MEASUREABLE – How will you know when you have achieved this goal?
ACTIONABLE – What steps will you take to achieve it?
REALISTIC – Is it possible to achieve your goal within the allotted time if you take the steps you have outlined?
TIME-BOUND – By when do you want to achieve this goal?
Here is another simple example from my kids. Instead of saying that they wanted to “read more” in 2017, they determined that they each wanted to read 3,500 pages in 2017. On the last day of the year, my 11-year-old came to me with her total: 3,665 pages. She was very proud of having achieved her goal, and it was something she could truly measure and know when she had achieved it. Her goal was S.M.A.R.T., allowing her to stay focused on a target throughout the year, but sometimes you need a shorter timeline to help with your focus.
You might have a list of several debts. Instead of having the financial goal of “paying off debt” in 2018, you can be very specific to say, “We will pay off the Visa by April 30th by paying $200 extra on it each month.”
Take some time and determine what your long-term dreams are; do this with your spouse if you are married. Determining those long-term dreams will help you determine what your short-term goals need to be.
Consider some of these as worthy choices that you can personalize for your 2018 financial goals; remember to make them S.M.A.R.T. goals as you personalize them.
- Pay off Debt X by Y date by paying a specific dollar amount to it monthly.
- Save $3,000 extra this year by adding another $250/month to our savings account.
- Maximize the match on my retirement plan at work by contributing X to the plan monthly.
- Create a written, personalized financial plan for ourselves by March 31st by meeting with a financial advisor.
Keep in mind that in the early years of paying off debt or of investing, it seems to take forever to make progress. Don’t worry about the ending balance at this point; just focus on the slow and steady progress of achieving your small goals, one at a time. The way that you read 3,500 pages in a year is one page at a time. Your goals will lead you to your dreams.
The following steps will help you get started:
- Consider your long-term dreams.
- Determine your short-term goals that will get you to those dreams.
- Make each goal a S.M.A.R.T. goal.
- Evaluate your progress monthly and adjust as needed.
- Set aside time at the end of 2018 to do the same dreaming and S.M.A.R.T. goal-setting for 2019.
HAPPY DREAMING AND GOAL-SETTING! MORE IMPORTANTLY, HAPPY GOAL-ACHIEVEMENT!