Setting goals is at the heart of budgeting. Without well defined goals, Expenses increase and Savings decrease. So, let’s talk about how to set goals.
SMART is a common acronym for setting goals, and it is my personal favorite. SMART stands for Specific, Measurable, Attainable, Relevant, and Timebound. To illustrate, let’s use a common example.
Almost everybody, after reviewing their Expenses, is surprised by how much they spend on eating out and delivery. Let’s say that you fit this bill, and you decide your goal is going to be:
Spend less on eating out
Before moving on to your next goal, let’s SMARTify this a little more. First, we want to make it specific. What we really want is to WANT to spend less on eating out - that’s what leads to long-term change. We could choose to spend a certain percentage less, but that encourages eating out at cheaper places, which may have a negative health effect. So, rather than reducing dollars, let’s reduce visits.
I will spend less on eating out by only eating two meals a week out of the house (including meals I have delivered).
Specific goals are generally easy to measure; specificity enables measurability. In this case, the goal is measurable by a simple yes or no question - did I do what I said I would? If not, how close did I come? (This second question informs future goals). This goal doesn’t need any editing to become measurable, so let’s move on to attainable.
Attainability is the most subjective (in my opinion). What is attainable for one person might feel like complete deprivation for another. Assuming that you have been averaging no more than 5 meals out a week, this should be attainable. However, let’s assume you get a lot of benefit from eating out for date night, and the main purpose is to connect with your significant other. Let’s adapt the goal to match your needs.
I will spend less on eating out by only eating two meals a week out of the house (including meals I have delivered), with the exception of up to two dinner/lunch dates.
It is also important that this goal is relevant. Again, this is subjective. Let’s continue presuming you feel your eating out is out of control and you desire a return of control.
Now, let’s make sure this is time-bound. Without a specified time to evaluate the change, the change goes on indefinitely. This would be fine if every change were positive and felt completely finished just the way it is, but sometimes it doesn’t work out that way. We need to determine how long it takes to test this new lifestyle and make an informed decision. Since it takes roughly 3 weeks to form new habits, let’s give it about a month, but make sure it is lined up with the weeks (because we are using a week as a unit of measurement in our goal).
I will spend less on eating out by only eating two meals a week out of the house (including meals I have delivered), with the exception of up to two dinner/lunch dates. I will start on June 1st (a Monday) and go through June 28th (a Sunday).
This pattern can be applied to just about any type of goal. Have you had success using the SMART process before? Are there other goal systems that you feel have helped you improve your financial health?
I spend most of my spare time playing with spreadsheets, my violin, or planting vegetables in my garden in hopes of bringing new insights into frugal living. Please enjoy, and don't forget to sign up for our monthly newsletter here.
Disclaimer - Mrs. FB is not a financial advisor. Nothing in these articles should be construed as investment or other professional advice, but rather personal opinion. Some links in these posts may be to affiliate sites - no products are advertised through this site that have not been personally used by the FB family unless expressly labeled.