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 Invest-Safely.com!

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Source:
SMART Goals Make Investing Plain and Simple
http://www.invest-safely.com/smart-goals.html

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 Invest-Safely.com!

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Source:
SMART Goals Make Investing Plain and Simple
http://www.invest-safely.com/smart-goals.html

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 Invest-Safely.com!

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Source:
SMART Goals Make Investing Plain and Simple
http://www.invest-safely.com/smart-goals.html

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.

Need help setting goals?

Download the new SMART Goal Template at Invest-Safely.com!

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Source:
SMART Goals Make Investing Plain and Simple
http://www.invest-safely.com/smart-goals.html

FREE SMART Goal Template Now Available

Need help setting goals?

Download the new SMART Goal Template at Invest-Safely.com!

SMART Goals
http://www.invest-safely.com/smart-goals.html

Investing Success - How to Know if You Have It

Ever since my first losing trade, I hated the feeling of losing money. I continued to look for ways to lower my risk of loss, knowing that there were always going to be losing investments.

As a result, I learned that you can't measure progress if you don't have a stable starting point (current state). And measuring your success and failures is required if you want better results, investing or otherwise.

And in turn, I steadily increased my use of processes for investing.

So it was great to read the following blog post at The Reformed Broker: Trade School: If It Can’t Be Measured, It Can’t Be Managed.

If you're not measuring both successes and failures, how on earth can you manage your portfolio or trading account?

Start 2011 off on the right foot and start get things stabilized by making your list of personal finance goals TODAY!

Should Personal Finance Writers Be Liable For Bad Advice

George Mannes (money.cnn.com) wrote an article on the "responsibility" that personal finance writers have regarding the advice they provide.

My blog is all about education, so this topic is something that I think about often. And I think that Mr. Mannes last sentence sums things up nicely:

As I have learned from personal experience, if people think I've given bad advice, word gets around pretty quickly.

I tend to stay away from providing advice, simply because your advice must be customized for your unique financial situation. And even then, you are ultimately responsible for your financial future (Principle #1)!

So don't take anyone's word for it, unless it is your own.

Sources:

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Should personal finance writers be liable for bad advice?

George Mannes - CNN Money

http://moremoney.blogs.money.cnn.com/2010/05/27/should-personal-finance-writers-be-liable-for-bad-advice