Many educators and businesses use the SMART goals concept, which was created by Paul J. Meyer and spelled out in his book Attitude is Everything. We think the SMART goals system can be a good tool for debt counseling; any financial goal we recommend should be SMART.
SMART stands for Specific, Measurable, Attainable, Realistic, and Time-based.
In a debt counseling context, applying SMART criteria to financial goals can really help clarify what our clients are hoping to achieve, and give them a better chance to succeed.
- Specific: saying you want to “improve your finances” isn’t a specific enough goal. Define your goals concretely; we suggest you set a goal to be completely debt free. If you also want to improve your credit, set a specific target, like “I want my credit score to be 800 or better.”
- Measurable: it should be easy for you to set measurable goals with your personal finances. You want to save 10% of your income for emergencies, and build up an emergency fund equal to nine months’ income. Those numbers should be easy for you to calculate. Looking at your credit card statements will give you a figure you can use to track your progress as you pay down your debts.
- Attainable: your goals should things you can achieve. If you set goals that are impossible, you are guaranteed to fail and you’re unlikely to even try. Some people come to us for debt counseling with tens of thousands of dollars’ worth of debt, and they might feel hopeless, like their goal of being debt-free is not attainable. The truth is, we’ve helped over 5.2 million people become debt free over the last four decades, and many of them had large amounts of debt that seemed insurmountable.
- Realistic: you can have a goal to repay your debts in four years or less, and a goal to buy a new Mercedes, but those two goals together probably aren’t realistic. You have to make choices, and focus on the goals you are most able to achieve. You also need to ensure that your goals are not pipe-dreams; winning the lottery might help you achieve your goal of financial freedom, but it’s not a realistic goal or worthy tactic.
- Time-based: you need to set a deadline for your financial goals. “Paying off all of my debt” is a good goal, but it’s not sufficient. The credit card companies want you to pay off your debts, too, but they want it to take 30 years and cost far more than you do. When we set up a debt management plan, we usually advise a payoff plan that takes approximately 4 years.
Setting concrete, written financial goals is crucial, and it’s equally crucial that those goals be SMART ones. Our debt counseling services have been helping consumers set and achieve goals since 1974.
Read more on our blog about how you can control your credit card debt by focusing on your goals, and call us today for free, confidential debt counseling services from an NFCC-certified credit counselor.