Watching Your Wallet: "New Years Financial Goals"

Published on the Utah Statesman website on January 13, 2010.

Next to streamers and a new calendar, making New Year's resolutions are the next big thing when ringing in a new year. Many are health-oriented: lose 10 pounds, run a marathon, eat healthier, cut soda from diet, etc. And there are New Year's resolutions as vast as traveling to Europe or getting better grades. But what about financial goals? Where do you want to be financially next month, next year or in 30 years? If you don't set goals you could be a long way from where you hope to be. The most exciting part about financial goals at this stage of life is that you can dream big, real big. We're young college students with a whole life ahead of us. We might as well set high goals to work toward.

The best way to go about making financial goals is to set short-term (within the next few months), intermediate (one to five years) and long-term (five years to lifetime) goals. Make a little worksheet that includes a description, plan, cost and date for each goal. For example, a short-term goal could be to save $300 to take a trip for Spring Break. Write down your plan for saving that money (save $25 from each paycheck until April), the cost ($300) and the date (April 1). From there you can break down the plan to save $25 each paycheck – eat out less, take the bus or ride your bike more often, etc.

Long-term goals are the most fun to make, because with careful planning and determination you can really make your financial dreams come true. When I was a kid, we had a babysitter who dreamed of going to Europe since she was a little girl. When she was about 7 or 8, she began to save all her money from chores, babysitting jobs and birthdays. For years, she saved all her money, and by the time she was 14, she had saved enough to take the trip with her sister. Most little girls dream of saving enough to buy a new doll or some candy from the grocery store, but she had saved enough to visit Europe.

So, really dream big. What do you want financially? Maybe a trip to Europe doesn't ring your bell, but what about a $2,000 emergency fund, elimination of student loans and credit card debt, a new car paid in cash, a down payment on a home or a fluffy retirement fund? Figure out what you want, then plan how you can make it happen.

Although many New Year's resolutions begin with vigor and determination, few will make it to February and even less will string into March or April. In all honesty, I have yet to meet many people who make their New Year's resolutions a reality the entire year through. I believe – and professionals and textbooks tend to agree – the reason for this is that they failed to make their goals specific, measurable, attainable, realistic or timely (and yes, that spells smart). This acronym for setting goals was first introduced by George T. Doran in a magazine in 1981, and since then, the steps have been widespread in their use to help create goals. And yup, you guessed it, this acronym can even be used in making financial goals. Here's a little more information on each of the steps.

1. Specific

First, goals have to be specific. Define what the goal is, who is involved, where it will happen and when it will happen by. Instead of saying, "I want to get out of debt," define when you want it to happen by, which debt you specifically need to eliminate and how you will get there.

2. Measurable

Define how you will measure your progress. If your goal is to get out of debt, set the dollar amount you need to earn to get there. If a goal is measurable, you'll be able to answer questions like, "how much," "how many" or "how will I know if it is accomplished?"

3. Attainable

Make the goal attainable by planning the steps to reach it wisely and by establishing a time frame. By doing so, you will be able to adopt the attitudes and abilities to reach the goal.

4. Realistic

It's probably not likely for you to reach a goal of saving for a Spring Break trip if you are living paycheck to paycheck, surviving solely on Ramen noodles. Set goals that are realistic, that you believe you can reach. However, don't rule out high goals – if you believe you can achieve them, make it happen.

5. Timely

Again, establishing a time frame is crucial to setting a successful goal. Words like "someday" or "sometime" don't belong in goals. You must set a date and a time line on how to get there.

T can also stand for Tangible. Can you experience it with one of your senses? Goals that are tangible are more likely to be successful.

So now, go home and redraft (or draft – you have to write goals down or else they're just wishes) your goals and make sure they fit the SMART criteria. Making goals specific, measurable, attainable, realistic, timely and tangible will increase your chances of success. Happy New Year and good luck.