Goal setting theory to make your life work!
Some goal setting theory is a good way to establish better goals and keep you motivated for achieving something in life. Goals in life give a sense of direction for the person and also teach him to prioritize the tasks he has to undertake to achieve that goal. A directional approach towards anything in life proves to be beneficial in the long run for everyone.
Based on the key importance of goals in life many experts have designed many theories but a widely used goal setting theory is the Dr. Locke’s S.M.A.R.T. theory. What does SMART stand for? Many of us have heard about the SMART goals and it stands for Specific, Measurable, Achievable, Results oriented and Time Bound/Target.
These are the major factors influencing and determining your achievements. Financial Planning is a crucial step to leading a tension free life and you have to set financial goals to lead a successful life.
The most important part of this goal setting theory is that involves some thought process. It is not as simple as waking up one morning and set up a financial goal saying you will be a millionaire by the end of the year. It is not possible or practical and moreover you will not work towards it either.
So, how this goal setting theory can help with your goals and specifically your financial goals?
There are some basic principles to follow in the SMART goal setting theory while setting your goals.
The first thing to determine is if you are clear about your financial weaknesses and dreams. That’s the best start point to set your financial goals. When you have this clear it’s easier to make them measurable and your behavior towards your goal is more directional.
According to the goal setting theory the challenge in taking up a goal makes all the more difference when pursuing it. Rewards do not seem important if the challenge is not really big. Set bigger financial goals or a more difficult thing to do in terms of savings and investments and then try to work towards it. When you achieve them you will have extra reasons to feel happy about.
Commitment to your goals also plays a vital role. Sometimes people lose the vigor and give up entirely against achieving their goals. If you are a committed it helps you to stay focused and work towards your financial goals. SMART is an efficient way designed to make a debt free world and people who have followed it with commitment have reaped its benefits.
Here are some examples of how your financial weaknesses and dreams can be translated into a financial SMART goal:
- Financial weakness: Say that comparing your budget with your income and expenses statement you have identified that your expenses in the family entertainment is above the budgeted amount and increasing your credit card debts.
You obvious goal is to cut some expenses.
Let’s translate this into a SMART goal:
Reduce the entertainment expenses (i.e. subcriptions) in 10% or the needed amount to not exceed the budgeted amount until the end of the year.
By the way, if you want to find ways to save money, visit
Money Saving Ideas, a good resource for this purpose.
- Dream: Say you want to retire early. You have analyzed your financial situation and you realize that your actual income is compromised mainly in the education of your children leaving almost nothing for saving.
If you establish a goal like: retire early, you will not only be disappointed but live stressed because you know that given your means you cannot afford your dream. So, if you cannot do something with your expenses then the solution is in your income.
You have to earn extra income to reach your goal.
Let’s think and set up a SMART goal:
Be able to retire at the age of 40 with a monthly income of $5.000. Better but let's work it a little more.
Once you establish this goal you have to calculate how much you’ll need to save for it. Today, there are many web resources to help you in this calculation. Let’s say you need $1.200.000. As we said, given your current financial situation saving that amount could take a very long time with a lot of additional uncertainties (more risks).
So, what could you do?
Yes! Establish a new SMART goal:
Increase my monthly income in $1000 (after taxes) creating a small business in a period of two years.
As you have seen, setting up goals is not difficult. Use this goal setting theory and setup your goals now! Is an important process to achieve financial success, make it challenging and stay committed to it.
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