Monday, January 31, 2011

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Tuesday, January 25, 2011

Investing Success - SMART Goal Setting - T is for timely

The final step in the SMART goal process is "T"; A SMART goal is Timely.

Setting a timeframe or end date is the last checkpoint for a SMART goal. An end point on your SMART goal gives you a clear target to work towards.

Without a time period, you won't feel any urgency to take action, and therefore you won't commit.

Back in December 2009, when Ed Whitacer became CEO of General Motors, he did not say that GM would pay back its loans. Instead, he said that GM would pay back $6.7 billion in governament loans by June 2010...part of the reason it was not "business as usual" down at "The Tubes" (hat tip to for coining that term over a decade ago)

Examples of a timely goal can include "within the next week", "for the next three months", "by the end of the year", etc.

Today, we complete our ongoing example. Here are a few ways to make the goal timely:
  • Save $250 per month by the end of the year (good timeframe if you're working towards a certain level of savings)
  • Save $250 per month for the next 6 months (good timeframe if you're trying to set aside money consistently)
  • Save $57.69 per week for the next 12 weeks (good timeframe if you're living paycheck to paycheck)
Choose a timeframe based on your personal financial statements so that your goal is also realistic.

You can also used your personal financial statements to measure your progress, hold yourself accountable, and make changes if necessary.

Saving $3,000 per year has the same end result as saving $250 per month for 12 months. But a monthly timeframe requires more attention and provides you with more chances to be successful!

Hopefully you've found this week's series on goal setting useful for your 2011 investing goals, as well as any other goals you set for yourself.

Good Luck!

Need help setting goals?

Download the new SMART Goal Template at!

SMART Goals Make Investing Plain and Simple

Monday, January 24, 2011

Investing Success - SMART Goal Setting - R is for realistic

"R" is the fourth step in our goal setting process; A SMART goal is Realistic.

SMART goals will require a reasonable amount of effort to attain. Realistic does not mean easy. Spend some time thinking about the goal and whether or not you have the ability to pull it off.

Within the automotive industry (particularly General Motors), this type of planning was used to develop personal "stretch goals".

Imagine you're trying to grab something that is JUST out of your reach; that could be a stretch goal (literally and figuratively).

Just because you can't reach it on your own does not mean you can't use a stool, ladder, or some other tool to get your prize.

So resist the temptation to set goals that you already know you can achieve for the sake of being "realistic".

If we return to this week's running example, making an achievable goal created a few changes. We now have a choice to make:
  1. Decrease the dollar amount of the SMART goal
    • Save $250 per month
  2. Increase your monthly income
    • Earn $5,000 per month (This goal is also specific and measurable)

You may chose to increase your earned income to $5,000 per month. But given the state of the economy lately (particularly that of the Metro Detroit area), your employer probably handed out pay cuts and pink slips to stay in business over the past few years.

If the environment really has stabilized, there are going to be a lot of people looking to recoup their losses. So increasing your salary (i.e. earned income) might require some extraordinary effort on your part just to get noticed!

And being realistic I'm assuming a raise of 6-10% (some might even argue that percentage is too high to be realistic).

Since extraordinary is usually much more than reasonable, the specific, measurable, achievable, and realistic goal is saving $250 per month.

Need help setting goals?

Download the new SMART Goal Template at!

SMART Goals Make Investing Plain and Simple

Investing Success - SMART Goal Setting - A is for achievable

Our third topic focuses on "A"; A SMART goal is Achievable.

A SMART goal is achievable when it meets the following criteria:
  1. The goal is something that you can personally influence (fixing Michigan's budget issue is probably outside of your range - unless your Rick Snyder)
  2. The goal is important to you
Targets that are outside of your control decrease motivation. Imagine you're a high school teacher, and you have tell a group of honor roll students that regardless of their individual effort, all will receive a "D" at the end of the semester.

How much energy and enthusiasm will they put towards your class?

If you're trying to save $2,000 per month, and your current, pre-tax income is $4,000 per month, attaining this personal finance goal will be extremely difficult and frustrating.

But all is not lost. A specific, measurable, attainable goal can still be created.

Here are two sample options:
  1. Decrease the dollar amount of your SMART goal
    1. Save $250 per month
  2. Increase your monthly income
    1. Earn $5,000 per month (This goal is also specific and measurable)

Need help setting goals?

Download the new SMART Goal Template at!

SMART Goals Make Investing Plain and Simple

Sunday, January 23, 2011

Investing Success - SMART Goal Setting - M is for measureable

For the second topic in this series, we'll focus on "M"; A SMART goal is Measureable.

You'll need some sort of system, process, or procedure that allows you to record progress toward a SMART goal.

If your job required answering a phone, you might have a goal to answer the phone within the first two rings. But how would you know how often you met your goal?

You need some way to record the number of rings for each call.

Lets continue with the example we started yesterday (saving $24,000 per year). If you save towards this goal in any type of account (bank account, savings account, trading account, etc.), you'll probably have access to a paper or electronic statement that can use to measure the account balance over time.

Or, if you are disciplined enough, you could diligently balance your check book...

Right, lets let the bank handle this one! But don't forget about your personal financial statements! As your account grows, you will also be keeping track of it using your personal balance sheet.

Need help setting goals?

Download the new SMART Goal Template at!

SMART Goals Make Investing Plain and Simple

Saturday, January 22, 2011

Investing Success - SMART Goal Setting - S is for specific

It is that time of year again!

Yes, I'm talking about those new goals you're going to achieve in 2011. The two most important things you can do to increase your success are:

1. Put pen/pencil to paper and write down your goal, then post it somewhere you can see it
2. Make sure your goal is SMART

The first step is easy enough. But in order to have a SMART goal, you need to meet the following criteria:

    Can you create a clear and concise description of your goal, using a number, percentage, rate or frequency?
    Is there a way for you to measure progress towards your goal?
    Do you have the necessary knowledge, authority and skill to achieve this goal?
    Can you achieve the objective with a reasonable amount of effort?
    Can you clearly define a beginning and end date or time period for this goal?

Today, I'll focus on "S"; A SMART goal is Specific.

"Specific" goals describe an observable action, behavior or achievement that is linked to a rate, number, percentage or frequency.

A statement such as "buy a house" could be considered specific, because you can clearly see whether you've purchased a home or not. But you should go the extra mile, and tweak this example a little bit: "buy one house".

If we focus on personal fiance, setting a goal like "I want to be rich" is WAY too vague. The term "rich" means different things to different people, and you're definition may even change over time. Besides, setting the goal to be rich in 2011 may be a little too aggressive.

Instead, you could use an account balance, a percent return, a savings rate, cashflow per month/quarter, or even a maximum loss/minimum profit per investment.

For example, you could create a goal to "save $24,000 per year"; the dollar amount ($24,000) and rate (per year) make the objective specific.

Need help setting goals?

Download the new SMART Goal Template at!

SMART Goals Make Investing Plain and Simple