This is a guest post from Lynnae at beingfrugal.net who blogs about similar things to what I do – her family’s journey out of credit card and student loan debt. She’s had some setbacks but she perseveres through with her cheerful outlook and plans for the future. Give her feed a try for another family’s debt elimination story!
We’re coming to the end of another year, and it’s a time when people begin to think ahead to their goals and dreams for the next year. Many people make goals related to health and money. And one of the big money goals is always to pay off debt.
There are several mistakes people make when setting goals. The first mistake is to make a goal that’s not measurable. Actually, that’s not even a goal at all. It’s a wish. “I want to make more money” would be an example of this mistake. How much is more? In what time frame do you want to make this money? It’s not specific enough.
Another mistake is setting the bar too low. If your goal is debt reduction, and you can afford to put $100 a month toward debt reduction, don’t make a goal of putting $50 a month toward your debt. If the goal is too easy, you’ll be tempted to skip a month, knowing you can “catch up” next month. But once you skip a month, you’re more likely to never get back on track toward your goal.
The third mistake is setting a goal that is too high. If you can only afford to put $100 a month toward debt reduction, don’t make it a goal to put $200 a month toward your debt. You will quickly become discouraged and give up. Make sure you keep your goals challenging, yet realistic.
The best way to set a goal is to use the SMART format: specific, measurable, achievable, relevant and time-bound. In our example of debt management, a good goal would look like this: In 2008, I will pay $100 to my credit card each month, until it is paid off.
- It’s Specific: $100 every month.
- It’s Measurable: $100 is a fixed amount, not “as much money as I can”. Every month is a fixed time, not “whenever I can afford it”. Until the card is paid off is not forever. It’s a fixed amount of time.
- It’s Achievable: You’ve made your budget. $100 is an amount that will challenge you enough to keep your goal on your mind, but it’s not so challenging that you will be sacrificing food, shelter, and clothing to meet the goal.
- It’s Relevant: Paying money toward your credit card is the essence of paying off debt.
- It’s Time-Bound: You’re paying $100 a month until your credit card is paid off. That is a fixed amount of time, assuming that $100 is more than your minimum payment.
That’s not to say you can never put more money toward your credit card. You may find that just having a goal inspires you to work to meet it even faster. Paidtwice is a great example of this, with the way she snowflakes as much money as she can to pay off her debt each month. But your basic goal should be realistic and measurable.
What are your financial goals next year? I encourage you to write them down. If you have a blog, write them on your blog. Then, if you feel like sharing your goals, make sure you submit them to the Carnival of Financial Goals. The next edition will be held on January 2 at my blog, beingfrugal.net . I’d love to include your goals!