Take the 'S-M-A-R-T' Approach to Getting Out of Debt

A road sign points to "debt free"
(Adobe Stock)

Goals are good. Or perhaps more accurately, good goals are good. They can provide the motivation and inspiration to get important things done. So, what is a good goal when it comes to your finances?

Fortunately, we don't have to reinvent the wheel, but can use the concept of "S-M-A-R-T" goal-setting. It's something I've heard over the years but didn't realize dated all the way back to the mid-1950s and Peter Drucker's book "The Practice of Management" (thank you, internet).

Here, I'll take that approach and apply it to the No. 1 financial goal I've encountered over the years: "I want to get out of debt."

Let's examine how this goal, which despite good intentions, fails to hit the mark, and what you can do to get it right:

S Is for Specific

The usual problem: The desire to "get out of debt" is good, but it's certainly not specific. Are you really talking about your mortgage, car loans, student loans and credit cards or just one part or another? What are you really trying to accomplish?

The fix: Be laser-focused. This time around, identify a specific debt or dollar amount to attack, and then you can move on to the next one.

M Is for Measurable

The usual problem: You can't measure what you haven't defined. However, with Step 1 done, you've now got a clear measuring stick to work against. If the goal is to shed $5,000 in credit card debt in the next year, you'll be able to map out a plan with periodic benchmarks to track your progress. For example, six months from now, if you've knocked $3,000 off the books, you know you're ahead of schedule.

The fix: Map it out. I've built dozens of spreadsheets for clients specifically designed so they can measure their progress, and it doesn't have to be complicated. Heck, write your goal and waypoints down, and post them on the fridge or mirror.

A Is for Attainable

The usual problem: Your enthusiasm overtakes your reality. Is the general notion to get out of debt attainable? For most folks I know, it is -- but not right away. Don't put your goal in jeopardy by biting off more than you can chew.

The fix: Focus on the bite, not the meal. How do you eat an elephant? One bite at a time. Well, apply that logic to your debt reduction goal. Instead of trying to eat the entire debt elephant, focus on just one piece, one bite at a time.

R Is for Relevant

The usual problem: You focus on the wrong thing. Why did you get into debt? Maybe it wasn't a one-off medical situation or an isolated bad decision, but rather habitual overspending. If that's the case, "getting out of debt" might not be the right goal.

The fix: Work on causes, not effects. Switch your goal to one that focuses on monthly spending control and adherence to a budget. That way, you're more likely to have lasting success.

T Is for Time-Bound

The usual problem: No specific time frame. If you're like me, you work better with a deadline, and guess what? Your goals do, too!

The fix: Set a date to get the task at hand knocked out as part of your new goal-setting process.

You will have a better shot at success if you ensure your goals are articulated in a S-M-A-R-T way today.

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