Lesson 1 - SMART Goals

Objective: Create at least two financial goals that fit the SMART (specific, measurable, adaptable, realistic, timetable) framework.

 *Before you begin this section, you should have a good idea of what the high-value areas are in your life, particularly those that you have future financial goals or objectives that you’d like to achieve. If you need some guidance on this aspect, be sure to fill out the first page of this form before moving forward!*

Welcome to the first lesson of this program! We’ll be discussing how to create effective financial goals so that you can create them yourself. First, let’s think of a time when plenty of people are setting goals – how about New Years? How often do people succeed at their New Year’s Resolutions? Not very often; in fact University of Scranton research suggests that only 8% of New Year’s resolutions are successful.

What are some of the reasons for such a low success rate? Often these resolutions aren’t specific enough and sometimes they aren’t very realistic. Whatever the reason, many of these failed resolutions are ultimately the result of poor planning. With that in mind, we will be discussing the SMART framework. SMART (acronym) outlines 5 characteristics that should be present in all well written goals.

The S in SMART stands for Specific; your goal should be as specific as possible. Someone who says they plan to save, in case of an emergency, $50 per paycheck, for 20 paychecks, 2 paychecks a month, starting the first of January, with the total goal of $1000 in savings at the end of October, will be far more likely to succeed than someone who simply says that they plan to save money, and leaves it at just that.

The M in SMART stands for Measurable. Your goals should be measurable; you should be able to easily figure out how much progress you’ve made. One way to quickly check if your goals are measurable is to see if you can identify a halfway point to accomplishing your goal. In our previous financial goal of $1000 in emergency savings between January 1st and October 31st, the halfway point of that goal would be $500 at the end of May. However, if your goal is simply stated as “save money in case of an emergency”, what is the halfway point to that goal? You don’t know, because that goal isn’t measurable.

Slightly different than some other SMART frameworks, A will stand for Adaptable (other SMART criteria use “attainable”, but that has quite a bit of overlap with realistic). Things happen in life that you don’t expect, and your goals should be adaptable, or flexible to account for that. If you have an emergency, or get a cut in hours temporarily, your goal should be flexible enough that they can be postponed for a while. The other way to look at this is that your goals should have a little “wiggle room”. If after creating a spending plan you expect $150 of income over expenses in the best case scenario, should you assume you’ll be able to save all $150 every single month? That’s probably not very realistic; $75-$100 might be a better target.

R in SMART stands for Realistic. Your goals should be challenging, but they should also be realistic for your current situation. Planning to have $5,000 saved up over the next 5 years might be realistic for some, but there are very few people that could come up with $5,000 in additional savings by the end of the week.

The last, and often most overlooked criteria, is having a timetable. You probably have those friends that say they’ll save up for a car, or start an emergency fund, but they don’t set a specific starting date, instead saying they’ll do it “eventually.” How often does “eventually” actually come around? To help you succeed at your goals you should always set a realistic starting date, and using your measurable goal, figure out a target ending date as well, and commit to it!

Example

Specific – $100 saved per month, for 6 months, total goal of saving $600

Measurable – Quantifiable savings per month ($100) and for a total goal ($600)

Adjustable – In this hypothetical, the goal setter realizes they have $200 per month in income above expenses, and chooses to save $100 per month in order to leave plenty of “wiggle room” in case of unexpected emergencies or overspending

Realistic – $600 saved in 6 months for someone with $200 in income above expenses (including accounting for occasional expenses!) is realistically attainable

Time-table – Target starting date of January 1st; target completion date of July 1st 

Assignment

Take some time to think about what are the important or high-value parts of your life that you have future plans/goals. Once you've figured that out, create at least two financial goals that fit the SMART framework, like the example above. 

Complete this assignment in Microsoft Word - if you do not have access to Microsoft Word, contact your course facilitator. Once you've completed the assignment, email the Word document with the assignment to your course facilitator, who will provide feedback via email.

Some lessons will require the completion of the previous assignment, however, if they do not, feel free to work on the next assignment. You must complete and receive positive feedback from all eleven assignments in order to complete this course.