Invest Safely: Investing Success - SMART Goal Setting

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:

Specific
Can you create a clear and concise description of your goal, using a number, percentage, rate or frequency?
Measurable
Is there a way for you to measure progress towards your goal?
Achievable
Do you have the necessary knowledge, authority and skill to achieve this goal?
Realistic
Can you achieve the objective with a reasonable amount of effort?
Timely
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.