You Need A Goal



This is #2 in a series of posts to help you Make A Plan For Your Money.  Before you do your goal setting, #1: You Need A Budget.  If you have a budget, you should have a pretty good feel about how much money is coming in and how much money is going out.  If you don’t have a budget, read the post above and start today.

Smart Goals

I look for five criteria when I develop a goal:

  1. Specific: Give your goal specific numbers and dates whenever possible.
  2. Measurable: You should be able to tell if you met your goal or not.
  3. Ambitious: The goal should be hard to achieve…
  4. Realistic: …but it should be possible to do.
  5. Trackable: You must be able to track your progress as you strive towards your goal.


Example 1:

  • We’re going to get out of debt.

This goal would be stronger if a date was attached to it.  I’d also add the specific amount of debt:

  • We’re going to pay off $27,000 in student loans by December 31st, 2019.

Now it’s specific and easy to track, much better!

Example 2:

  • I’m increasing my retirement savings this year.

Get specific!  What was your savings rate last year, and what is your target this year?

  • I’m increasing my savings rate from 8% to 65% this year.

Well that’s certainly Ambitious, but do you think it’s Realistic?

  • I’m increasing my net savings rate from 8% to 30% this year.

Much better! But let’s make it easier to Track your progress:

  • I’m going to improve my savings rate each month by 2% until I reach my target savings rate of 30% of my take home pay.

Setting your goal this way let’s you check your progress each month, rather than wait until the end of the year to find out how you are doing.

Example 3:

  • I will save for my child’s college fund.

When is this happening, and how much are you saving?

  • I will save half of the cost of college by the summer of 2033, when he turns 18.

Sorry, how much is “half”?

  • I don’t know.

Well let’s look at what in state college costs now and set half of that, adjusted for inflation, as your target.  Let’s pretend in your state we researched and found it costs about $30,000 per year to attend college.

  • I will save $60,000, adjusted for inflation, by the summer of 2033 for my son’s college education.

It’s okay if you are “guessing” at $60,000 – it’s much better to have a specific target in mind and adjust that your aim later if you find out that $60,000 is too much or too little.  Don’t be paralyzed by not having perfect information, just get started with what you do know.

Your Goals

The big goal most people are reading websites like this one for is retirement. However, everything in this article applies if your goal is to get out of debt, save for your children’s college, or save for a down payment on a house.  I’d generalize farther and say that the criteria listed above for a Smart Goal applies to the rest of your life as well.

Your goal is a living thing: it will change in size and scope as opportunities and setbacks appear in your life.  The fact that you don’t have perfect information shouldn’t stop you from setting an ambitious (but realistic) goal that is specific and easy to measure and track.  I’ll be diving into more detail in future posts, but I recommend Chris Hogan’s site as a good jumping off point if you’re eager to get specific on a retirement goal.

Do you already have a goal for your money?  Share it in the comments below – you might help someone else think about their goal or receive some advice on improving your own.


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