Create Steps for Your SMART Goals

Create Steps for Smart GoalsIn the last post, I went over SMART Goals. The goal we were looking at was, “I want to have $1,000,000 net worth by the age of 55 so that I can be financially independent by age 55”. The next step is to create steps for your goal.

Create a Plan

A goal needs to have specific steps that can be completed in order to reach the goal. We fail when we do not list the steps needed to complete them. Some steps need to be done in a specific order. Nobody has a goal of building a house without having a plan for when the foundation needs to be poured, the walls need to be built, and the roof put on. If you had three different contractors lined up to do those steps and they all came at the same time, your house is not going to be built.

In order to reach our goal of $1,000,000 by age 55, we need to determine how much to save each month. It is possible that after you determine what you need to save, your goal is no longer attainable for you. At least maybe it is not attainable with your current financial situation. You then need to add additional action steps on what you need to do in order to reach your goal. You might need sub-goals or additional goals like paying off your debt or increasing your job skills. Maybe one of your action steps is to sell your house and downgrade because you will determine that you made a financial mistake by buying too much house.

Let’s say you have no money saved for retirement and are age 35. A savings calculator will tell you that you need to save about $1,300 a month in order to have $1,000,000 in 20 years. (Assuming a 10% rate of return.)

Maybe you can save only $500 a month right now. That is fine, and your goal is still attainable, but some of your steps might look like this:

  • I need to save $500 a month for one year
    • Since I am already saving $500 each month, I need to review my 401k investment options by the end of the month to make sure I have the right mix of investments
    • By the end of the month, determine the job skills I need to increase in order to continue receiving a 2-3% raise each year
  • After one year, I need to save $800 a month for one year
    • Cut my restaurant budget in half in order to save $200 each month
  • In two years, I need to save $1,100 a month for eight years
    • Over the next 6 months, determine the steps I need to take to be able to save $1,100 each month
  • In 10 years, I need to save $2,200 a month for 10 years.
    • Over the next 12 months, determine the steps I need to take to be able to save $2,200 each month

This is okay because you now know what you need to do to achieve your goal. You can plan the actions needed to achieve these steps. Maybe you need a different career in 10 years, or you need to cut your bad shopping habit from your lifestyle. Whatever it might be, you can plan for it because you have a goal and steps.

Here are some examples of action steps needed to reach $1,000,000 net worth in 20 years for someone with $75,000 of debt, no emergency fund, and with a household income of $75,000 a year:

  • Get on a budget within 3 months that frees up $2,000 a month that can go to paying off debt.
    • Write out my current budget within the next week
    • Each week determine one thing I need to spend less money on and update my budget
  • Eliminate our $75,000 of debt in 24 months by:
    • Sell my $30,000 vehicle by the end of the year and buy a vehicle I can afford
    • Pay off $2,000 of debt each month for 24 months
  • After our debt is eliminated, save $2,000 a month for 12 months in order to have a fully funded 6-months emergency fund of $24,000
  • Sell the current house within the next 6 months and purchase an affordable home that works for us
  • Pay off our new, affordable, $150,000 mortgage in the next 5 years by paying $3,000 a month
  • After we are 100% debt free, save $2,500 a month for 12 years to have around $800,000 in investments
    • Each year determine the amount of money I need in order to be financially independent

*In 20 years, $1,000,000 net worth (investments and house) might not be enough to be financially independent but having a plan to get there is a very good start.

Those action steps could be separate goals for some people. Set up your goals and create steps in a way that works for you.

Take Action

You have your SMART goals and you have your action steps. Now it’s time to act! Write your goals and steps down and hang them on your fridge so you can see them every day. Each day determine if you are on track to reach your goals. If something in your life is causing you to not reach your goals do not change your goals. Change your lifestyle and your habits. Maybe you need a couple of additional goals in order to accomplish this. If you are not on track, then you need to determine the actions to get back on track.

“People with goals succeed because they know where they’re going.” Have a plan to build wealth. Use the goal and action steps outlined above and tailor them to fit your needs. It doesn’t matter what your age is or what your current financial situation is. Having goals can help you win.


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