Setting SMART Financial Goals

EP 50 - Setting Smart Financials Goals

 [00:00:00] Welcome to our motivational Monday episode of the ask Ralph show where I have a simple goal. And that's to provide you some motivation. To achieve financial success.

So, let me start today's episode by asking you a question.

Have you ever found yourself struggling to stay motivated? When it comes to improving your finances.

 maybe you've set some goals for yourself in the past. But you fail to achieve them. Let me let you in on a secret. You're not alone. My friends. [00:01:00] Many people struggle with this challenge. I can recall many times when I wanted to make changes to my financial situation, but it always seems so overwhelming.

It seems so difficult. A few days ago, I met with a young couple. And they really wanted to buy their first home. They needed to save $5,000 for a down payment. So today I'm going to share with you the advice that I gave them by sharing a tool. That can help you overcome this hurdle. And set yourself up for success.

We'll call this smart goals. And we're going to use the letters.

S M A R T smart goals provide a systematic approach to goal setting and motivation. These will transform the way you approach your financial future. So, let's jump right in and explore what smart goals are and how they can make a difference in your life.

 If you're looking for the notes from today's show, you'll find them at our website and that's askralphpodcast.com. I'll also give you a quick plug for my book. I [00:02:00] wrote a book called mastering your finances. And in that book, I talk about smart financial planning. It's something I've discussed extensively in the book.

So if you're interested in getting a copy of that book, you go right to amazon.com.

Just search for my name, Ralph Estep that's E S T E P. So let's start with some basics.

Smart is an acronym. That stands for specific. Measurable achievable. Relevant. And time bound. So you want to remember that? S M a R T that's specific. Measurable. Achievable. Relevant, and time-bound.

When you set smart goals, you give yourself a clear roadmap. This makes it easier to stay motivated and track your progress.

So, I thought we'd take some time and break down each element of smart. And discuss some examples of how you can apply them to your financial goals, because

That's the deal at the end of the day here. Right? Folks. It's how can I apply this Ralph? Well today, I'm going to give you some [00:03:00] applicable things you can do.

So we start with the letter "S" which stands for specific.

It is absolutely important to define your financial goals with as much clarity as possible. Here's a great example, instead of saying, "I want to save more money. A more specific goal would be, "I want to save $5,000 for a down payment on a house in the next 12 months. When I met with this young couple, that was their goal. They wanted to have $5,000 ready? Sit. they could go and buy a home. By being specific. You can focus your efforts and measure your progress effectively.

 but you have to be specific. In doing that.

So let's move on to "M. M stands for measurable.

It's crucial to have a way to track your progress and determine whether you're moving in the right direction. One of the things I always say is what gets measured gets done. Let's talk about that $5,000, home deposit example. You can break it down into smaller milestones. that you can measure. [00:04:00] Did you know that if you needed to save $5,000 in 12 months, that means you need to put aside $417 per month. Or maybe that's too long, a range. But you could actually accomplish that by putting $96 away per week. So you can look at your finances each week and say, yeah, let's say husband and wife.

Hey. Honey. Between the two of us. We need to set aside $96 every week so that we can hit that $5,000 goal by the end of the year, by the end of 12 months. And see that's the key it's measurable. We can measure. We can see how we're doing every week. We can look at it every month. We can look at it, every quarter we can look at it.

So let's move on to a. And "a" is achievable. And what I'm going to say about that is it's great to dream big. All of us want to have these huge dreams. It's essential to set goals that are realistic though. And within your reach. So, for example, we talk about the same example of $5,000. Saved in 12 months. Well, if you're currently [00:05:00] saving a hundred dollars per month, Aiming to save $5,000 in the next month probably will not be achievable.

You know, if the couple said to me, look, you know, Ralph, I, we are so excited. We're going to go buy this home. And in the next 30 days, we're going to save $5,000. And I'm going to say to them, that's not going to happen. First of all, I don't know that they have the income to do that. But secondarily, if they normally only put a hundred dollars away per month, And I've just told them to get their goal.

They need to do $96 per week. We need to be. Reasonable or in my case, we're using a word, a achievable. So instead, you could set a goal to increase your savings by 10% each month. Until you reach that desired amount. So in our example, they're say they're saving a hundred dollars a month. Well, they're not going to get the $5,000 in a year unless they dramatically increase the amount. that they're saving, but what they could do. And say, Hey, let's increase that by 20% each month. So the first month, we'd have a hundred dollars and we'd have $120 and so on and so forth. That will [00:06:00] help you build momentum and the key to all of this. Is building momentum.

That's going to increase your chance of having success.

So we talked about. Specific. We talked about measurable. We talked about achievable. Now let's move on to "R"

R is relevant. And this is the key folks. Your goals need to align with your overall financial aspirations and values. You have to start by setting these goals. Frankly, I recommend you put these in writing. like this couple I met with, I said to them, go home today. And put in writing. your savings plan.

Your savings plan is you want to have $5,000 set aside. In 12 months. And we talked about that to $96 a week. So when you get home, you write down An action item for lack of a better term. And you say, look, every week I'm going to put away $96. you have to ask yourself why achieving this goal matters to you. If it doesn't matter to you, you're probably not going to do it.

Let's just be blunt. Saving for a down payment on a house might be relevant to you. If your homeownership is an important long-term goal. Just like the [00:07:00] couple I met with. They have a goal of owning a home.

When your goals are relevant. You know, they're interesting to you. You're more likely to stay motivated. And committed to seeing them through. So let's move on to the final letter that we're talking about. So we talked about specific. We talked about measurable. We talked about achievable. We talked about relevant. Now we've got to move on to the biggest one, I think. And that is time bound. You have

to set a time frame for yourself. Setting a deadline for your goals adds a sense of urgency. And helps you stay focused. So let's talk about our case of point here.

We're talking about today, this $5,000 savings. Setting a deadline at 12 months gives you a clear timeframe to work with. It also allows you to break it down into smaller, manageable tasks. And establish a timeline for each one. And that's a key to this folks, breaking things down into smaller, manageable units will make the process seem less a difficult. [00:08:00] And if I said to that couple, Hey. All right.

 over the next 12 months, figure out $5,000. The likelihood of success is pretty small, especially if they're only saving a hundred dollars a month. But if we set up a plan and says, okay, listen. We need to save $96 a week. And in 52 weeks, you're going to have $5,000, 12 months. Well, that's time bound.

 we have a measurement tool. And it can check their progress as they go.

So now that we've explored each element of smart goals, let's take a look at some more specific examples. So the $5,000 with one example, Let's talk about how you can apply this to different areas of your financial life.

Here's a great one. Let's say you have a significant amount of credit card debt you want to pay off, man. A lot of us have been down that road. I've personally been down that road and it seems. Untenable. You have take one credit card. You'll get another credit card. And after a while you've got this stack of credit card. You're like, how am I ever going to pay this down, Ralph? Well using the smart framework, your goal could be. [00:09:00] I'll pay a $5,000 a credit card debt within the next 12 months. Well, how are you going to do that?

I'm going to make an extra $500 payment each month. This will help you become debt-free and improve your credit score.

So you wanted to. Pay down your credit card debt. Did you use our smart framework? You set a goal. Your goal was specific. I want to pay $5,000 on my credit card balance It's measurable. It's achievable. You can do that. It's relevant. It's important to you to pay off your credit card debt and it's time framed. It's time bound. You only do it in 12 months.

Let's look at another example. A lot of people ask me about this one. How do I start saving for retirement? Sounds great.

Right. Okay. I want to put money away for retirement, but how do you get to that point? Well using our smart goal framework. You could say something like this. "I invest $10,000 in a brokerage account within the next five years. By contributing $200 per month in my retirement account. Well, why are you doing that? It's going to help me grow my wealth insecure, comfortable [00:10:00] retirement.

So we go back to, is this specific? Yes. $10,000. In a brokerage account, is it measurable? Absolutely. It's $10,000. Is it achievable? Sure $200 per month for five years is achievable. Is it relevant? Well, yeah, you just said to me, It's important that you have a secure and comfortable retirement. And is it time-bound?

Yes, you've set a goal for yourself of five years.

Let's look at another example. Maybe you're aiming to increase your income.

Using our smart goal framework. You could say this. I'll start a side business within the next six months in generate an additional $500 per month in income. Why are you going to do that?

Well, here's the why? This will help me create a financial cushion. And achieve greater financial stability. Let's look at our table again. Smart is a specific, yes, I'm going to start a side business. Is it measurable? Yes. I'm going to make $500 per month in income. Is it attainable? [00:11:00] Probably. So. It's about $125 a week. Is it relevant?

Well, you just told me that you want to have a financial cushion and achieve greater financial stability. And is it time-bound? Yes. You given yourself six months to build up to that $500 a month. An extra income. I'm hoping this is clicking with you.

Let's move on to another example. Let's say you want to improve your credit score? Well, a lot of us need to do this at times. I've been. You know, in the finance manager's office at the dealership and they give you that old boy, you know, your credit score is not so great, Ralph. Now, fortunately, I'm not at that point now, but I think all of us have seen that or been there.

So. Using our smart framework. How do we fix that? Pie in the sky would say, "I want to have a better credit score. Well, that sounds nice. Isn't it? All of us want a better credit score. But what if you use the framework? And set a specific, measurable, achievable, relevant, time bound goal. Like, this. How does this hit you? "I will [00:12:00] pay off $2,000 a credit card debt. Within the next six months. Reducing my credit utilization ratio. And improve my credit score.

See, that's the specific. I'm going to pay $2,000 a credit card debt. It's achievable. Sure. If you want to focus on that, you could do it.

Is it measurable? Yes. You can measure it's $2,000. Is it relevant? Well, you just said to me, You want to have a better credit score? And is it time-bound? Yes. You've given yourself six months to do it.

While I'm talking about credit scores. I did release a podcast episode a few weeks ago about how to increase your credit score by 200 points.

So you can go to the askralphpodcast.com podcast page. And you can see that under our featured episodes. Let's look at one more example for today. And

this is one that I think we all would love to do. Let's say you want to save for a dream vacation and who doesn't want to go on a dream vacation.

Well, the pie in the sky answer would be, "I want to save money for a vacation. [00:13:00] That sounds nice. But is it smart?

Well, let's rephrase it. Let's set a smart goal. Which it would sound something like, this I'll save $5,000 for a vacation to Hawaii. Within the next 18 months by setting aside $278 per month. This will allow me to enjoy well-deserved vacation. While staying within my financial means. So look at, here we go.

Smart. Is it specific? Yes. I'm going to save $5,000 for a vacation. I'm even getting more specific. Cause I want to go to Hawaii. Is it measurable? Absolutely. You set a goal $5,000 goal. Is it attainable? I think so. You've said to yourself, 18 months, I can put $278 a week. Excuse me, $278 a month away.

And is it. Relevant. Well, yeah, that's important to you. You want to take a vacation? Is it time-bound yeah. You're giving yourself 18 months. Let's look [00:14:00] at one more example. Maybe you're interested in building an emergency fund.

And I did a podcast a couple of weeks ago about a building, an emergency fund. I'm not going to go over that again, but if you want to go listen to it, I think it was very useful. So that rather than setting a vague goal. Like, here's a great one.

"I want to save money for emergencies. Again, we all want to do that. But is it a smart goal? How do we rephrase that? Well, here's a suggestion. I'll save $10,000 in an emergency fund within the next two years by setting aside $417 per month. This will provide me with a financial safety net and peace of mind. Again, Is it specific?

You bet. It's your, is. I want to set aside $10,000. That's very specific in an emergency fund. You know, maybe you go set up a bank account. That's just for that.

Is it measurable? Absolutely. You've said $10,000. Is it attainable? You have to look at your budget and say, can you really set aside $417 per month? If you can, [00:15:00] then it's certainly attainable. Is it relevant? Well, absolutely. You just told me you want to have a safety net, a financial safety net, some peace of mind in emergency fund. Is it time bound? It sure is. Cause you said two years. I hope these examples have helped you.

they illustrate how the smart framework can be applied to various financial goals. Where it's improving your credit score, saving for a vacation, or building an emergency fund.

Remember, this though. By setting goals that are specific. Measurable. Achievable. Relevant. And time-bound. You can empower yourself to take control of your financial future and increase your chances of success.

And that's the whole goal of our Monday show is to how do I motivate. People. To improve their finances am I can help one person. I feel like I've done my job for today. So I hope that applying the smart goal setting process to your financial journey, you will experience increased motivation. I hope you'll find clarity. And you'll make progress towards your [00:16:00] financial goals.

I remember, this because it's real easy to get down on yourself. Rome wasn't built in a day. I think it took to, I'm just being funny. And achieving financial success takes time and effort.

Well, how do you do that, Ralph? I'm gonna tell you how you do it and it's not complicated. Stay committed. Stay focused, and keep moving forward.

So before I wrap up, let's recap, some key takeaways from today's

show. Smart goals provide a structured approach to goal setting. Helping you to find your objectives, track your progress, and stay motivated.

Remember again, make your goals specific, measurable, achievable, relevant, and time out smart.

S M a R T. And don't forget to break down your goals into smaller milestones. This way you can celebrate your achievements along the way.

Remember, this. Getting motivated and improving your finances is within your reach. You can do this. It's time to take control of your financial future and make your [00:17:00] dreams a reality.

Now go put this into action. Visit our podcast page at askralphpodcast.com. Where you can leave us a review or send us a message. We always love hearing from our listeners.

So in the end, my friends, as I always say, thank you for tuning in. God bless, you. God, bless your finances and stay financially savvy.

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