When putting things into perspective with regards to planning and achieving our goals, the S.M.A.R.T. planning model can be a very useful tool. The acronym stands for ‘specific’, ‘measurable’, ‘attainable’, ‘realistic’ and ‘timely’. This model helps us set our goals based on these five measures, which makes our goals clearer, gives structure, and allows for better planning and execution. In this essay, I will analyze the case of setting goals using the S.M.A.R.T.
The person in this case has set the following goals: pay off the student loan, buy a house, save for their children's education, accumulate assets, retire and sail around the world on her boat.
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All goals are measurable because they have specific dollar value and are subject to time limits. Example, the person needs to pay off $53,000.00 for the student loan and the car loan will be paid off in approximately 1 year.
All goals are attainable. For example, with a proper budget, it can be calculated that this person would be able to pay off the student loan in just under 7 years ($53,000: $7,720=6.87 years), as well as accumulate certain assets along the way after paying off her student and car loans.
All goals are realistic. The student loan was a necessary one. It was taken out for educational purposes, and can be determined as an asset towards achieving later goals and greater earning power to ensure these goals will become a reality.
The S.M.A.R.T. planning model is an instrument of planning, that can assist us to set goals and can equally guide us through the process of attaining these goals at a specified time period, so that we can have the desired results. This tool solidifies that a goal must be specific, measurable, attainable, realistic and timely for optimal achievement to occur.
A goal which is not specific is less inclined to stand the test of time. In evaluating the person’s goals, I think they are specific because they can be further segmented into three categories, making it clearer and easier to execute: short-term goals, intermediate goals, and long-term goals. Her first step was to take care of the day-to-day expenses and her car loan, which could be paid off within the year (these can be viewed as her short-term goals), this would then free up her budget and allow for focus on the goal of paying off her student loan, which would be fully repaid in just under 7 years, and could be classified as an intermediate goal. With two loans paid off, and now behind her, she is now better able to tackle her long-term goals which are: purchasing a home, saving for her children’s education, savings towards her retirement, accumulating more assets and buying that boat she wants to sail around the world, after she has retired. All of this can be achieved through the first investment that she made – her college education. With her degree, she will be able to apply for and attain higher paying jobs and further assets such as investment in stocks and bonds, that she will then be able to sell later to finance those other long-term goals, and realize them using the S.M.A.R.T. tool method.
Reference
- Siegal, R. & Yacht, C. (2009). Personal Finance. Saylor Foundation. Licensed under Creative Commons CC BY-NC-SA 3.0.
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