Using SMART goals to save money in 2016
Reach your financial goals by using the SMART goal strategy.
Saving money is a vital component of financial health. However, according to the BankRate.com Financial Security Index Survey, fewer than one in four Americans, 24 percent, are saving more than ten percent of their incomes and sixteen percent are not saving at all. Developing a savings habit may be difficult but the SMART goal strategy is one method to use in the creation of strong financial goals.
SMART is an acronym. Each letter in the word represents a specific step in defining the elements of a strong goal:
S – Specific
M – Measurable
A – Attainable
R – Realistic
T – Timely
Specific: I want to save money is a general statement. I want to save $10 per week for 20 weeks to pay for guitar lessons by June 1, 2016 is a specific statement. Include the amount of money to be saved, the length of time it will be saved and the date when you will reach your goal.
Measurable: Record your progress. For example, if you are saving $10 per week, you should have saved $40 in the fourth week. Your progress can be measured by the amount of money you have saved. The ability to measure your progress is critical to achieving the goal. It helps you to keep moving forward or make decisions that will get you back on track.
Attainable (or Achievable): Base the achievement of your goals on what is in your control. It’s better to base your savings goal on your current income rather than a future raise or a windfall that hasn’t happened yet.
Realistic: Will achieving your goal cause a negative impact in other areas of your finances or lifestyle? If you can save enough for the music lessons, what are you going to do for an instrument? Will you still be able to meet your monthly obligations if you must rent one? Realistically, do you have time for music lessons and practice? Your goal may be smart but it may not be practical at this time. You may have to postpone or cancel it and move on to your next goal.
Timely: Have you calculated the amount of money and length of time needed to reach your goal? A little pre-planning analysis will prevent you from setting yourself up for failure. You can determine whether more time or money is needed to be successful.
This SMART goal strategy can be applied to other areas in your life such as improving your health or learning a new skill. The key is to start with a short term goal. This is a goal that can be achieved in less than six months. After achieving success with the short term goal, then progress to a longer one.
More savings tips can be found online. Michigan State University educators invite you assess your financial health and visit Michigan State University Extension. In addition, Michigan State University offers money management and homeownership classes. For more information about classes offered in your area visit MI Money Health.