Life Times Newsletter

Winter 2008
Vol. 10, No. 1

Setting SMART financial goals for the New Year

Suzanne Gellman, MS, JD

Financial Education Specialist

If you’re like many people, you probably have some resolutions for the New Year: pay down debt, save for retirement or increase your retirement savings, create or increase an emergency fund, save for college, reduce spending, etc.

In a Money Magazine poll, only 24 percent of those polled had kept New Year’s resolutions on their financial goals. The likely reasons are because the goals may not be realistic, or people tried to do too much at once. Most likely, however, it’s because they did not create a plan for how to achieve their goals.

As the adage goes, if you fail to plan, plan to fail.

To help you achieve your resolutions, write them down and set SMART goals. 

S – Specific.  What are you going to do and why? How much does it cost? Create a written plan of how to achieve your goal. Don’t just say, “I want to save more.” Decide what you’re saving for and why – emergency fund, trip, retirement, all of the above.

M – Measurable.  How much are you going to save per week, per month and, if it’s a long-term goal, per year. Use direct deposit or automatic transfers to make saving easy and to move money out of your checking account into a separate savings account.  Pay yourself first!  If you’re looking for online calculators to help you determine how much to save or how much you need, check out and choose the topic area you’re interested in to find calculators or tips.

A - Attainable and Action-oriented. Dare to dream, but have a plan. Although goals should push your limits and abilities, goals still need to be within reach and “do-able.”  Make sure you include smaller, actionable steps along the way in your plan. Having small, but regular, successes will help you stay motivated. For example, kick or reduce one spending habit this month, then next month start contributing that amount to your 401k.

R – Realistic.  Make sure you have the skills and resources available to achieve your goal, or that you can develop the skills or resources needed.  Finding balance is often an important component to being realistic.  For example, you may want to increase your savings, but make sure you still have spending money so you have some current enjoyment from your money.  No plan should be a straightjacket.  You may also need to take baby steps to try to reach your goals. Don’t try to do it all at once, or you set yourself up for failure. For example, if you’re trying to cut back on spending, don’t try to quit or reduce all your spending cold turkey. Try to cut back or reduce one spending habit at a time.  Once you master the first habit, go on to the next.

T – Timely.  Set a time frame to achieve your goal.  Make sure any longer term goals have short-term and intermediate steps so you can measure your successes along the way. Review your goals periodically to make sure they’re still timely and on track, or whether they should be revised or eliminated.

Here are a few tips of important financial goals people often forget:

·      Create a financial notebook or folder for the person in your household who doesn’t manage the finances, including location of documents and emergency contact information.

·      Review wills, trusts and advance directives and update as needed.

·      Review insurance policies.

·      Review your investments. Is the investment allocation still right for you?

·      Review beneficiaries on insurance, bank/investment accounts, retirement accounts, etc.

·      Build up your emergency fund.

·      Make sure you have a financial emergency kit, including copies of important documents in case you need to leave home on short notice. 

·      Create or update your household inventory list/video.

·      Make your home more energy efficient to reduce spending. 

Implementing these ideas may take time, but not always as much money. Give yourself and your family a gift: Get them done!

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University of Missouri Extension Editor: Roxanne T. Miller