OK, so you put losing weight and quitting smoking on your short list of New Year’s resolutions – good for you and certainly good for your health! But possibly the most important resolution you can make to improve your financial health is to simply set some basic financial goals for the new year. But what is an example of an effective goal?
For a financial goal to be genuinely helpful, it must have three key attributes:
1. It must be measurable. For a goal to really be effective, it must be quantifiable – something we can measure and track. For example, if we simply say we “want to be rich”, obviously that phrase means different things to different people. A specific numeric goal is essential if we want the goal is be a meaningful motivator.
2. It must be achievable. Setting a goal that is clearly out of reach is not only a waste of time, but doing so can actually become a powerful de-motivator. Becoming disillusioned and losing interest will only make your financial situation worse.
3. It must have a time frame. This is the one that some folks fail to include. Being specific about a time frame for achieving the goal helps to create a sense of urgency and keeps us focused on our expected timetable for achievement.
An example of a goal with all of the attributes mentioned above might be: “My goal is to have $2,000 in my investment account by the end of the year.” That is a goal that virtually any typical college student can certainly achieve, but not without some hard work and dedication.
Counseling a graduate student recently, we laughed when we stumbled on how sometimes our New Year’s resolutions compliment each other. The student told me he was committed to stop smoking in January. Previously we had discussed the simple math behind compound interest and how putting away just $5.00 a day would absolutely make him a millionaire by the time he retired. Do you see the simple answer? You guessed it – a pack of cigarettes costs about $5.00. So simply by quitting smoking and diverting that money into his investment account, the student is well on his way to improving his health, both physically AND financially!
My new slogan for college students: “Quit smoking. Become a millionaire.” Bumper stickers for everybody….