Why Your Debt Goals Aren't Getting You Anywhere...

We all aim for goals such as losing weight, spending less, saving more and getting to the gym. There is absolutely nothing wrong with setting goals. Goals are great! Do we always achieve them? Often, the answer is NO. Why not? More times than not is because we are just too vague with our goals and we do not write them down.

It has been said that the difference between a Goal and a Wish is that Goals are written down.

The first thing we need to do to ensure our goals are met is follow the S.M.A.R.T. guidelines of goal setting. SMART goals are Specific, Measurable, Attainable, Realistic and Time-bound. When we set goals like “get out of debt” or “lose weight,” we do not set ourselves up for success. Why? We did not set specifics, we didn’t say how we would measure our progress, we don’t know if it’s attainable or realistic and we didn’t set up a time frame for any of this. Maybe, that is why statistics show that only 9.2% of us ever achieve our New Years’ Resolutions each year.

How would we go about setting up a SMART goal for getting out of debt? What might this look like?

Let’s say we want to get out of debt. Well, that is a very vague goal and missing all the important components of a SMART goal. According to Value Penguin, the average American household has $5,700 in credit card debt as of July 2020. If we only look at indebted households, that number jumps to $9,333. Let's set a specific goal:

Let’s say our 2020 goal is to pay that $9,333 credit card debt off in the next 12 months, so we would be going into next summer debt free.

Step 1 (Specific)

We are going set up a specific goal. We will pay off $9,333 in 12 months, which means our goal is to pay off $777.75 by the end of each month. We just took the total amount $9,333 and divided by twelve months. It is a good rough estimate and will adjust because of interest…but let’s keep it simple for this example.

Step 2 (Measurable)

Paying off $777.75 a month might still be a little too vague. We'll need to break it down into how much we need to pay off per paycheck. If we get paid weekly, then we would be paying $194.44 each week. However, if we are paid twice a month, we will be setting aside $388.88 out of each paycheck. We have a stated amount now to pay either two or four times each month, depending on our pay schedule.

Step 3 (Attainable)

Then, we need to ask ourselves, “Is setting aside $388.88 an attainable goal?” Where will that money come from? First, you will need to see where are you spending money? Can you eliminate from any of the following?

• A $5.00 cup of coffee Monday-Friday can save you $100/month

• Happy Hour drinks or Curbside Margaritas can save you $100-$200/month

• Take out food or delivery food service can save you $100-$500/month

• Bringing lunch instead of buying can save you $60/week or $240/month

• Sticking to the list at Target can save $50-$100 per trip

• Stop the “Add to Cart” online shopping habit and save up to $500+ per month

• Going to the grocery store when you are not hungry can save $25+/week

Are there other ideas that can save you money? Does this seem attainable for you? Do you need to pick up a part time job? The easiest way to move forward is to cut some of the frivolous spending and re-assign those dollars to your debt. If you find you have an income problem, look at possibly picking up more hours, applying for a promotion or taking on a side hustle. Whatever works best for your life.

Step 4 (Realistic)

Now, in this example, let’s say that we are going to cut out the following:

1. Daily Starbucks Macchiato out (~$45/paycheck)

2. Our Margaritas To-Go drinks will be cut back (saving ~$45/paycheck)

3. Order take out only once per week instead of every Friday, Saturday and Sunday (saving ~$180/paycheck)

4. We are going to stick to our Target list (saving ~$80/paycheck)

5. Have a homemade lunch each day (saving ~$50/paycheck).

That brings us to a savings of $400/paycheck! Is this realistic for me to do? We are still picking up our Curbside dinners, hitting Target since we are in a pandemic, its easier to make lunch at home if I am working from home right now anyways. We might miss the coffee and margaritas, but it doesn't feel as bad as that debt does. This feels like a realistic goal! Remember, each of these steps is VERY crucial. We wouldn't know that we needed to cut back on Starbucks or Takeout unless we got very specific and strategic.

Step 5 (Time-Bound)

We have set our 2020 goal to pay down $777.75 per month, paying $388.88 each paycheck. We will make the small adjustments to our lifestyle as mentioned in Step 4 and complete this goal by July 2020. Next summer, you could have paid off $9,333 and find yourself enjoying the sun totally debt free!

As we step into a new month, what SMART goals do you want to achieve this year? Pay off debt? Lose weight? Kick those student loans out the door? Exercise more?

Using the SMART goals formula, you can meet any goal you put your mind to! Just remember to make it Specific, Measurable, Attainable, Realistic and Time-Bound. Chunk your goal out to ONE month at a time and you will reach that elusive resolution that you may have missed in years passed.

You can do this, one small step at a time!