In this episode CFO at Home, we look at goal setting by borrowing some ideas from the business world. If you’re listening to a Personal Finance podcast this time of year, you may be thinking “This is the year that I’m going to get better with...
In this episode CFO at Home, we look at goal setting by borrowing some ideas from the business world. If you’re listening to a Personal Finance podcast this time of year, you may be thinking “This is the year that I’m going to get better with managing my money!” “I’m going to be less wasteful, create a budget and stick to it, get out of debt, improve my credit score, start saving, or achieve some other other financial objective. These are all good and worthy goals, but before you pull out that spreadsheet, download that app, or read that “how to budget” article, let me challenge you to ask yourself a simple question; what’s your goal?
A noted study by psychology professor Gail Matthews recruited 267 business professionals to look how goal achievement in the workplace is influenced by three key actions:
The study showed a direct connection between following these steps and making progress towards achieving goals. 43% of those in the study who were told to simply think about their goals accomplished those goals or at least made it halfway through the process of achieving them. However, the number jumped to 76% for those who completed all 3 key actions.
So for starters, let’s focus on writing out a clear goal. Thinking about your goals is a good start, but getting that goal out of your head and written down has been proven to increase your likelihood of success. To help with this, let’s look at a classic method of establishing goals, again, from the business world, known as SMART goals.
SMART Goals. SMART is a acronym:
So at this stage of the game an example of our SMART goal could be “Pay off my VISA card in the next 6 months” The goal is specific and progress towards it can be measured on a weekly or monthly basis. We can verify that the goal is achievable in the time frame we choose as we develop our goal-directed actions (goals can be adjusted as needed to become more achievable in the timeframe chosen). We should also gut check that the goal is relevant and important enough to both us and our partner to justify the sacrifice required.
So for now, consider developing this one simple goal as your homework. Don’t over think picking the right goal. The great thing about your finances is that as you’re working towards one goal, you’re typically setting the stage to get multiple areas of your financial house in order. For example, one of the goal directed actions needed to pay off your VISA card could be to develop a spending plan in order to identify available funds to pay off the debt faster. A spending plan may also improve management of your bills, resulting in you paying your bills on time more consistently. Paying bills on time is the largest scoring factor in your FICO credit score. Credit Utilization (the % of your credit limit used) is the second largest factor. So actions taken while working towards the goal of paying off your VISA card may also have a positive impact on your credit score. As you progress from goal to goal, the accomplishment of each goal can have a positive impact on your total financial picture.
In the next part of this series, we’ll focus on developing and committing to goal-directed actions. Until then, get busy on that written goal.
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