As I think about the New Year, I picture bright blue water, white sand beaches and the green it will take to get there. This year will mark a decade of marriage to my accountant husband, and we’re planning a tropical getaway for the end of 2014.
Saving for the trip is among our financial goals for the year, along with continuing to max out retirement contributions, pay down the mortgage, and add to the kids’ college funds.
I was glad to read we’re not alone in making money-based resolutions. Fifty-four percent of Americans will consider financial resolutions for 2014, an all-time high, according to the fifth annual Fidelity New Year Financial Resolutions Study.
While long-term savings goals lead the way, more Americans are leaning toward short-term goals, the study found. And these short-term goals have become more practical (like stashing an emergency fund or paying down credit card debt) versus luxurious. (Sorry, boat salesmen.)
For the third year, the top three resolutions are to save more money, pay off debt and spend less money. While those are all worthy resolutions, stated as is they’re not “SMART.”
SMART stands for specific, measurable, attainable, relevant and time-based.
It’s not enough to resolve to “save more money” or “pay down debt.” You need to get down to the nitty-gritty of how, how much and when. That’s where the SMART acronym comes into play. It can help you make your financial resolutions a reality, regardless if they’re set Jan. 1 or mid-July.
Let’s apply SMART goal-setting to our second honeymoon:
• Specific: The goal needs to be concrete. “We’re saving up for a vacation” is too vague. We need to say where we’re going, when and for how long.
• Measurable: We need to have a target, in this case an actual dollar amount, so we know when we’ve reached the goal. Being specific will allow us to research travel packages and get an accurate figure, but let’s say $2,000 for now.
• Achievable: Is this goal within reach? If not, we could plan a less expensive vacation or wait another year.
• Relevant: Is this trip important to us? Should other financial goals take precedence?
• Time-based: In this case, our travel dates provide us with a timeframe. We’re looking to go in mid- November, which gives us 11 months to save up the $2,000. That’s $182 a month, or $42 a week, or $6 a day.
To accomplish this, we could set up regular automatic transfers into a savings account. When we took a trip to Jamaica in 2008, I set up a spreadsheet to track extra cash from bonuses, gifts, coin jars and even recycled cans.
Some take SMART another step, adding evaluate and re-evaluate for SMARTER goal-setting.
Either way, it’s a tool that can firm up your resolve, whether you want to make changes to your work life, waistline or wallet.