How To Turn That Resolution Into Reality
January 05, 2016I was talking to a group of girlfriends over an amazing cup of hot chocolate with melted chocolate on the bottom and toasted marshmallows on top. For a chocoholic like me, this was heaven. I will admit I focused more on the chocolate than the conversation, but after a few minutes, my financial planning ears perked up. My friends were talking about their top New Year’s resolutions, which was the same for all of them- to get out of debt.
As I listened to them talk, something struck me about the conversation. They talked with great emotion about how they want to get out of debt, but there was not a concrete plan of action. When I mentioned this to them, they gave me a blank look, collectively saying that they have no idea where to start. I pulled out my notepad (I always carry one – occupational hazard) and introduced them to setting goals based on the S.M.A.R.T. acronym. S.M.A.R.T is a method of organizing goals into concrete action steps:
The “S” stands for specific. Getting out debt is a great, but not very specific. The more specific your goal is the easier it is to plan for how you will achieve it. A more specific goal is to choose the specific debt you plan pay off first- like a high interest credit card.
The “M” is for measurable. Use a Debt Inventory Worksheet to assess how much debt you have and the interest you are paying on your debt.
The “A” is for attainable. Look, I am the ultimate optimist, but my bank account makes me a realist. I can have a goal to save one million dollars in 2016, but unless I win the lottery, this goal is out of my reach.
Use the DebtBlaster Calculator to see how much money you need monthly to pay off your debt by the end of 2016. Can you pay this extra amount each month? If not, consider focusing on getting rid of one credit card, like the one with the highest interest rate.
The “R” is for realistic. How realistic is this goal considering your current financial situation? For instance, if you have the extra money to pay down your debts, it may be attainable, but if you don’t have the discipline to do it, is not realistic.
What are you willing to give up to get out of debt? For some, it may be cutting back on cable. For others, it may be eating out less. Are there other areas where the funds are needed, such as funding a baby emergency fund of $1,000 or using the funds for much needed car repairs? Asses your current financial situation to make sure you can realistically set aside the funds needed to get out of debt.
The “T” is for time bound. One of my favorite quotes is that a “goal without a deadline is just a dream.” Setting a date when you intend to achieve your goals helps you to focus
It also holds you accountable. Use the DebtBlaster Calculator to set a realistic date to pay off your debts. Consider doing this in baby steps if you have a lot of debt. Set a goal to reduce your debt by “x” amount by 12/31/2016 or eliminate one of the debts.
Getting out of debt is tough. It requires changing habits. Setting S.M.A.R.T. goals can help you turn that resolution into reality.