I find that two of the most common New Year’s resolutions we make each year boil down to health: Either our physical health or financial health. Folks, I’m really not a big fan of New Year’s resolutions. They’re too easy to break. We get mired in defeat before we even start to do things right. However, I am a big fan of setting goals.
Motivational speaker Jim Rohn once said, “Discipline is the bridge between goals and accomplishments.” Whether the new year is providing you with an excuse to establish new goals for financial or physical wellness, or you have just decided that the time is right; the important thing is you’re taking that first step. And finding a disciplined way to reach your goals can be the difference between success and failure.
So, with our time together this week, let me offer a disciplined approach to meeting your goals: It’s called SMART.
SMART is an acronym that was first introduced to me when I was studying for my MBA, many years ago. It stands for Specific, Measurable, Achievable, Realistic, and Time-Related. It’s a technique that can help people reach their goals. While it’s commonly used in business, I find that it can be applied to every other part of life, too.
You see, SMART enables you to clarify and focus your ideas, and helps you use your time and other resources most efficiently. Let’s drill down to understand these concepts a bit more.
S: Specific. What is it that you want to achieve? But there’s more to it than that – you should also understand why you want to meet a specified goal, who needs to be involved in making it happen, and what resources you need to make it happen. As you develop a specific goal, answer the five W’s: “What, Why, Where, Who, and Which.” Create a written plan that outlines your goals.
M: Measurable. How will you identify when you have met your goal? You want to be able to track your progress because even small increments will help you realize you’re on the way to success.
A: Achievable. Create a series of steps that outline how you will reach that goal. Make sure that the goal you’ve set is attainable. Do you have the resources you need to make it happen? Are you talking to the right people?
R: Realistic. Now that you’ve identified an achievable goal, you should double-check yourself to make sure that this is the right thing for you to do. Is it practical to set this goal? Is this the right time in your life to be making this decision?
T: Time-related. Set a time frame to help you achieve your goal. Is your goal long-term or short-term? Setting a time frame helps you prioritize short-term tasks you might need to worry about today or tomorrow from longer-term tasks that will get you to the finish line. Review your goals periodically to see if they’re still timely, or if you need to adjust your time frame. And don’t be afraid to revise those goals if the time you’ve given yourself to achieve them is not realistic.
Now that we’ve discussed SMART criteria, allow me to suggest ways that you can apply this technique to your financial life.
The first step is to define your goal. Is there a target savings amount you want to accumulate by the time you retire? Or, is there a defined income stream you are trying to achieve? Or, is your goal to finance your kids’ college education or leave them with an enduring legacy? Frame your financial plan as a tangible goal you can reach.
Remember the five W’s? “Who” is an very important one. Because that who you’re working with may have an impact on how you can reach your goals. When it comes to retirement goals, it is important to understand the differences between the two industry standards that govern how retirement specialists work: the fiduciary standard of care, and the suitability standard.
Generally, Registered Investment Advisors (RIAs) and Investment Advisor Representatives (IARs) are held to the fiduciary standard, which requires them to always act in their clients’ best interest. Period. Many financial institutions and professionals are held to the suitability standard and are only required to make recommendations that are suitable for their clients. Unfortunately, that standard does not require them to always act in their clients’ best interest.
Are you working with the right person to help you reach your goals?
Once you have outlined your specific goals, develop a set of measurements to help you determine if you are on the right track. If your goal is to increase your retirement savings by your target retirement date, how much should you be accumulating each year? What’s a realistic amount, based on your income and your expenses? Be honest with yourself when you examine both your costs and your cash flow.
Setting an achievable goal can be difficult. It’s a delicate balance between pushing yourself and knowing your limitations. You may need to make adjustments along the way because if you put your goal too far out of reach, you will get discouraged. Be flexible.
That brings us to realistic. Your goals must be practical and attainable must help you succeed. Is it helpful to set a goal to buy a waterfront home in Malibu? For most of us, probably not.
Lastly, you want to establish short-term and long-term timeframes. What do you need to do today, this week, or this month to keep you on track? Often times, the two criteria of timeframe and measurable are related.
One of the most important things to remember: If you don’t meet your financial goals, don’t lose heart. Merely readjust your goals and move forward. Every day is a new opportunity to reach the success you deserve. Never give up!
&et me end with another quote from Jim Rohn: “Success is nothing more than a few simple disciplines, practiced each day.”
Now that’s Smart!
Be vigilant and stay alert, because you deserve more in 2018 and beyond.
Have a great week!
Jeff Cutter, CPA/PFS is President at Cutter Financial Group, LLC, with offices is Falmouth, Duxbury, and Mansfield. Cutter Financial Group provides private wealth and investment management advice incorporating low risk, low volatility financial strategies. Jeff can be reached at firstname.lastname@example.org.
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