The following blog was originally published in Federal Navigators’ Blog.
You have probably heard of the term “SMART goals” before. The term has become a bit of a cliché these days and it’s almost impossible to listen to a motivational speaker or read a self-help guide without hearing the phrase. When something has become this overused it can become almost a natural reaction to ignore it. I think that may be a mistake when it comes to retirement planning, though. Just because it’s overused and cliché doesn’t mean it can’t have a practical application.
What is a SMART goal?
For those of you who have been living under a rock the “smart” in smart goals is an acronym. I know, the self-help industry using a clever acronym to make their point is a total shocker, right? Anyway, it stands for specific, measurable, attainable, relevant, and time-bound, and I think it’s a pretty smart way to start defining your goals for retirement (see what I did there?). Just like it would be crazy to plan a trip without first picking a destination it’s also crazy to plan your retirement without first clearly defining what exactly you hope to accomplish. It’s surprising how many people don’t take the time to do this. It’s not surprising that as a result very few people accomplish their goals. How could they if they don’t even know what they are?
There is some real value to doing this.
Look I get it, it’s a daunting task to sit down and think about what you really want and with all the things you have going on in your life who has time for silly motivational exercises that rarely seem to make a difference anyway? There’s still time for that tomorrow right? Not to mention, it’s not like you are going to be able to afford the things you actually want anyway. I agree, especially if that is your approach. But it doesn’t have to be that way. Instead you could actually start to define what you want your outcome to look like, and I think you might be surprised at the results. I do realize that just because you put a goal on paper doesn’t mean it’s going to come true. It takes more than just sitting around thinking positive thoughts for dreams to become a reality, but we tend to move in the direction we are looking and setting your sights on clearly-defined goals will most likely help you move closer to your desired results. The concept of SMART goals is a really useful framework for approaching this. Here’s a good way to use it:
Ten Quick Steps To Knock This Out
Step One: Find a quiet place and set aside one hour of distraction free time. That means no cell phone, no computer, no interruptions, no TV, and nothing other than you, a pen and some paper.
Begin writing down what your ideal retirement would like. It’s important that you remove the filter. Remember, no one else has to see this. Don’t re-read what you wrote, don’t fix grammar or spelling , and don’t think about whether it will be possible or not. Just write a stream of consciousness, and you can go back and edit it later.
Take a look at what you wrote and start listing your goals in bullet point format. Again, it doesn’t matter if you feel like these are possible at this stage, just list them.
Now it’s time to start using the SMART test. Go through each goal and ask yourself: is it specific or vague? For example, “have a bunch of money” is vague. “Maintaining my exact standard of living” is specific.
Check to see if your goals are measurable. Ask yourself, how will I know if I achieve this? Using the example above we would need to add the amount you are living on today. So we would change it to “produce $5,000 of net income every month in retirement.” You will know you have reached your goal if every month you have $5,000 in net income.
Next go through each item in the list and ask yourself: given my current resources is this goal actually attainable? Are you willing to put in the time and make the sacrifices you need to in order to achieve this goal? If the answer is no, cross it off the list. Step Seven: Look at the goals that you have left on your list and ask yourself if they are relevant to your reality. In other words, is this something that you actually want to achieve or something that you feel like you should achieve? You probably won’t work very hard to achieve things that aren’t extremely important to you. If it’s not relevant, cross it off the list.
Organize your remaining list by priority.
Go through each goal and set a deadline. When will you achieve this goal? Write down a deadline for each one.
Finally, create a sub-list for each goal with the actions that need to happen between now and your deadline in order for you to achieve it. In some circumstances you may find that you don’t know what actions need to be taken. This would be a good opportunity to enlist the help of a professional. Congratulations, you now have a clearly defined list of goals. Tony Robbins would be so proud!
Trim the fat.
Don’t be afraid to remove items from your list. This should be about quality, not quantity. A huge list of mildly important goals is overwhelming. Try to focus your list to 4-6 goals that really move you, that would really define your ideal retirement.
Remember, these are just goals and they are not set in stone. Life will throw you curve balls, your goals will change, and that’s okay. This is a process and you will likely have to review and update your goals as your circumstances change. The frequency will probably depend on how far away from retirement you are. This should not take you very long if you really focus your efforts. I think once you get started you will find that you actually enjoy the process. Dreaming about your future can be exciting, especially when you remove the filters. Once you have completed the above, you will have a nice foundation to start building the rest of your financial plan.
A good framework for the rest of your plan.
Obviously, just defining your goals is not enough. This is only a starting point and there is still a lot to do in terms of your comprehensive financial plan. However, taking the time to do this will really help you to define and guide the decisions you make when putting together the rest of your plan.
About the author: Federal Navigators, located in Gaithersburg Maryland, was founded in 2012 by Ryan Dunn and the partners of Medallion Financial Group. John Stohlman, Dan Searles, and Laura Stohlman been in business for over 25 years each, are all certified financial planners,and collectively manage well over $300 million in assets. We aim to empower Federal Employees with the education, direction, and advice they need to make wise decisions about their benefits and retirement. Visit our website, federalnavigators.com for more information and check out our blog, federalnavigators.com/blog/ for weekly posts.