According to a University of Scranton study, only 8% of people who make New Year resolutions succeed in keeping them. A staggering 92% of New Year goals go unfulfilled! What are the reasons for this extremely high failure rate? One of the major causes of unfulfilled goals is that they are often poorly defined; lacking quality.
In last week’s article, I pointed out that goals are valuable because they goad, guide and guard the goal-setter. The higher the quality of a goal, the higher its value. What are the features of a quality goal? I will address this question by applying the popular S.M.A.R.T acrostic to financial goal setting.
Specific – every quality goal has a what. What is the focus? A stated goal such as “I want to be financially secure” could be interpreted in several ways. Does financial security mean job stability or having a seven-figure retirement nest egg or a guaranteed pension for life? Being specific makes a goal memorable by removing ambiguity.
Measurable – answers the question “how much”? Management guru, Peter Drucker remarked, “what gets measured gets done”. A quality goal is quantifiable and progress can be tracked. If your goal is debt reduction, how much debt do you plan to pay off? If your goal can’t be tracked, how would you know if you hit it?
Realistic – Is your goal within reasonable limits? A quality goal should stretch you but not beyond breaking point. Recognize there are things more important than money. Do not pursue financial gain at the expense of your health or to the neglect of your family. Keep your balance.
Timely – when is the best time to reach for your goals? Now. Time has value, monetary value. There is a fundamental concept in Finance known as time value of money. Essentially, it says a dollar today is more valuable than a dollar in a year’s time due to the power of compounding. It’s a double-edged sword. A dollar invested today is, all things being equal, more valuable in a year’s time. Debt deferred today is more costly in a year’s time due to accumulating interest. Put the power of compounding to work for you by taking timely action.