Financial Reflections

It’s the time of the year where people set goals.  But rather than bore you with my financial goals for 2009, I thought I’d put something together to help you make your own goals.  My goal is to help you set goals that let you live those dreams in 2009 and beyond.

People love setting goals, but far too often we fail to reach them.  I’ve learned that sometimes it’s the way we set goals that counts.  For instance, a very common financial goal is to be rich.  So someone will say “I want to be rich,” and possibly get a bit frustrated when it doesn’t happen.

So how do we get SMART about that goal?

SMART is an acronym that comes from project management, but has some real applications outside the workplace.  The letters in SMART each stand for a specific attribute a goal must have to be one that can be met.  Let’s dive into what each of the letters means and see how we can improve that lofty “I want to be rich” goal.

• Specific (also significant or stretching) – A goal has to be specific.  Some people thing being “rich” means making a lot of money.  Some think it means having a large net worth.  I’m all about building net worth, so I’m going to change the goal a bit – I want to have a large net worth.  I’d say that also qualifies as significant or stretching for most people.

• Measurable (also meaningful or motivational) – Now that we’ve gotten specific, this part is easy.  Net worth should be easy to track, right?   But how much is “large”?  How about a million dollars?  That sounds meaningful and motivational, at least to me.  Everyone wants to be a millionaire, right?  New goal: I want to have a net worth equal to or greater than one million dollars.

• Attainable (also agreed upon or action-oriented) – A goal should be attainable.  Can we attain this goal?  Hmm.  A million is pretty big, but according to reports, there are now many millionaires in the US.  It’s a goal that many have attained and requires action.  One interesting thing is “agreed upon” – what does your significant other think of your goals?  I’m going to assume any partner would be OK with having a millionaire around.

• Realistic (also relevant, rewarding and results-oriented) – is this a goal that’s realistic for the person setting it?  For someone just starting out in life or who already has a half million invested, it might work well.  For someone who’s much older and a hundred grand in the hole, maybe another goal is more realistic.  Is a financial goal relevant to your needs?  I really think it would be rewarding to most people, but not the same as some other things as friends and family life.

• Time-based (also tangible and trackable) – This is the part that can turn a goal into action.  When will one start trying to get that million?  What’s the deadline to get there?  That varies each person’s situation.  Let’s go for a nice round number and our final improvement on the “I want to be rich” goal: My goal is to have a net worth equal to or greater than one million dollars in the next 10 year. Sound good?

For someone almost to one million, it might be in 2009, for someone just starting out it might be 30 years.   Money is one of the most tangible and easy to track things around, which maybe makes setting financial goals so much fun.

So what are your SMART money goals for 2009?  Please share them in the comments below.  I’d love to hear what your goals are.

Some SMART resources: Project SMART Wikipedia Goal Setting Guide