“I want to own a house someday.”
“I really wish I could retire.”
“Will I ever get my student loans paid off?”
“I want a better credit score.”
Sound like your dreams for your finances? It sounds like me and most of my clients, too. When I sit down and we start talking about where they want to be, I hear vague statements like this. The problem is, if the vague statements were enough to motivate us to accomplish things, they would already be done. What we need is a way to bring these lofty goals into reality. It’s time to think SMART.
Break down the overarching goal into steps. If someone wants to establish credit, I ask them what they need to do to make that happen. “I need to go visit both of my local banks on my street, ask them what products they have, and apply for a secured credit card.” Once you see the steps, it becomes real and doable. Seeing that there’s just one small step encourages you to take that step, rather than seeming like one big leap into the unknown.
“I want to feel like I have control of my money” is a common statement. But what does this mean to you, and how will you know if you achieve it? “I want to create a written plan for my monthly income and use a budgeting app to track expenses weekly and stay within those planned amounts.” That’s measurable. Likewise, “I want to pay down my debt so that it’s not overwhelming” doesn’t put teeth on the decision. “I am going to work 5 hours of overtime weekly for the next 8 weeks so I can pay off my car early and free up $200 monthly in my budget.” That gives you a plan.
We all love dreaming big. The white picket fence. Retiring at 50 (or ever). A cruise in the Bahamas. Putting your kids through college. But there’s got to be a happy meeting point where the sky kisses the earth. I think the most common one I hear is people who get pre-approved for homes and then start shopping around based on the maximum amount they’re approved for. The amount approved is based on your gross (before deduction) pay but we all know we don’t have that much to work with once the paycheck is deposited. When it comes to house size, don’t make $300,000 gross promises (pun intended) on a $200,000 sized net. A realistic assessment of your budget – and reassessing every few months – can keep you focused on something manageable.
Relevancy tends to fall into two categories. Sometimes I have clients who think they have to set goals like – getting credit cards paid off or spending less on eating out perhaps, as though it’s just the right answer. But if it’s not the steps that you’re motivated to take right now, they’ll never get off the ground. Other times, clients express goals that are in the very distant future – starting a college fund for a newborn when you are about to have your car repossessed. (Really.) Take stock of your current situation and determine what’s most pertinent to you AT THIS TIME. When I talk with clients about setting SMART financial goals, I often ask, “Why do you want to make this change NOW?”. It helps both of us see the motivating factors so that they choose something relevant and can keep the forward momentum.
This is always my final question. “How soon can you take that step?” It’s all a dream until there’s a deadline.
“I’ll apply for that secured card this Saturday.”
“I’ll talk with my HR manager about my withholdings first thing Monday morning.”
“I will call and pay off my credit card Friday afternoon after I get off work and my paycheck is in the bank.”
“I’ll take pictures of the items in my storage shed this Saturday and will post them for sale online on Sunday.”
Once you put a date to it, you can plan your day around that and see it through. And ideally, the first step should be taken within the week while your motivation is still high. It’s not that the dreams were not accomplishable before, but now they are in manageable steps that are actually gaining in forward motion. And the best news is that once that motion gets started, the inertia helps to carry you to the next step.
Sometimes getting the inertia going is the hardest part. Let us help. Our Financial Services Specialists are also financial coaches who can walk you through this process. Our experts can help you develop an action plan unique to you that’ll help you achieve SMART financial goals. We love to see people grow in knowledge, but also in its practical application. Contact us at 800-355-2227 to book a Financial Health Plan, currently $20 off with promo code FinFit. Book the session & start achieving SMART financial goals and develop a lifestyle of financial fitness.