Conquer Your Finances in 2016 with S.M.A.R.T. Goals
As quickly as the New Year comes and goes, so do many of our best intentions for change in 2016. We find ourselves reassessing what is important and setting goals to improve every aspect of our lives, from our finances to our health. And yet despite all of our best intentions, only roughly one in ten of us will accomplish our New Year’s resolutions and achieve the goals we set ourselves in the New Year.
The Reason We Don’t Accomplish Our Goals
Whether you are trying to climb the corporate ladder or desperately trying to turn your idea into the next Facebook, life as a young professional is busy, making it nearly impossible to find the time to self-reflect and evaluate our lives. So when the New Year comes around we spend a few minutes during our somewhat uninterrupted commutes to work thinking about what we want to accomplish in the New Year. With the radio blaring and traffic distracting us we commit to “save more” or “be healthier” or “spend more time with family” and move on.
In fact, many of us won’t even write these down and so for the first month of the year we might transfer an extra $500 into savings or get to the gym an extra couple times during the first few weeks, but come February it’s likely many of us have reverted back to our old ways.
The issue with how we set goals isn’t that they are not well intentioned, but rather they are not S.M.A.R.T (Specific, Measurable, Achievable, Relevant, and Timely). Take the “save more” goal for example and run it through the S.M.A.R.T. test. Is it specific? Definitely not. Is it measurable? Nope. Is it Achievable? Not sure. Is it Realistic? Probably, but what’s the plan to make it happen? Is it timely? Sort of.
SPECIFIC Goals Help You Focus
Focusing in today’s world filled with a constant flood of Tweets, likes, and innumerable other distractions is difficult, but leaving goals vague only adds to the difficulty in accomplishing them. Think about it for a second – how focused can you be on “saving more” if you have no idea what “more” actually is?
If you are looking to “save more” define how much more and into what savings vehicles you intend to use. For example, “my goal is to save 15% of every paycheck into my 401k.” Now that is specific and makes focusing on accomplishing that goal much easier because you know what you have to do.
Make Your Goals MEASURABLE
It has been said that, “if you can’t measure it you can’t manage it.” If you are planning to “save more” how do you know when you’ve achieved your goal?” You can’t! So, get really clear on how you will measure your goals in 2016 to ensure that you can monitor your progress along the way. By assigning a measurement to what success looks like you can constantly reassess what it takes to stay on track or get back on track.
For example, if your goal was to “save $5,000 into a 529 for your child by the end of the year” and July comes around and you’ve only contributed $500, you know almost immediately that you are behind and what it takes to get back up to speed.
Goals Should Be ATTAINABLE
We all want our investments to go up in any given year, but setting a goal to “earn more on my investments” is to a large part out of your control. Sure, you can minimize investment fees, create a well-diversified portfolio, or get more aggressive, but you can’t guarantee that your portfolio will earn more in any given year, because what the market as a whole does is completely out of your control.
Instead focus on setting goals that you can accomplish given the things that you can control. Maybe you just got married and you had your first child and you haven’t updated your beneficiaries on all of your assets. Accomplishing that goal is something that is definitely attainable by the end of the year because success is in your control.
Make Your Goals RELEVANT
It’s important to break big, long-term goals into short-term, actionable mini-goals that you can accomplish, making it all the more important to ensure that your yearly goals are relevant to what you are trying to accomplish in the long-term. If you are hoping to buy a new home in five years, then make sure that your New Year’s goals are focused on taking steps to move in that direction.
For example, if you are hoping to make a down payment on a new home in 2020, you’ll likely need to have 20% of the purchase price saved for a down payment. Determining approximately what that amount will be and then working backwards to determine specifically how much you’ll need to save each year to get there will help move you in the right direction each year.
TIMELY– Put a Finish Line on Your Goals
Putting an end date on your goals is critical to success, because many of us are guilty of procrastination or rather putting less important things off for more pressing issues. When it comes to your goals in 2016 be sure to assign a specific end date, whether that is December 31st, 2016 or not is up to you.
If you are married and just had new kids you might want to set an earlier date to have an insurance needs analysis done to ensure that you are adequately insured a lot sooner than just the end of the year. Whatever the goal, assess the importance of how quickly it needs to be accomplished and then set a realistic and timely date.
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