How SMART are you about your debt and financial goals?

Well, if you are familiar with the concept of SMART: S=Specific, M=Measurable, A=Achievable, R=Realistic and T=Timely, then you can apply this acronym as a working model for getting out of debt and becoming more financially stable. For instance, if you have too much credit card debt then applying the SMART concept would work something like this:

First and foremost, you need to be Specific about your goal for decreasing or eliminating your debt. An example of this would be, “I want to stop all spending on my credit cards and pay down the outstanding balance each month”. That is Specific, a concrete step toward reaching your goal.

Secondly, you want to be able to set a Measurable way to accomplish your goal. A way to do that would be “I will pay $100 a month toward my outstanding credit card debt”. Setting a pre-determined amount to pay every month is a way in which you can track how much your debt is decreasing each month. Your credit card statements will show you how well you are reaching your goal.

Next, you want to make sure your goal is Achievable. If your SMART goal is to pay $100 a month towards your debt and your debt is high, say $100,000 then your goal may not be Achievable. If however, you plan to pay $100 toward a credit debt of $2500, that may be a better example of an Achievable SMART goal .

The fourth aspect of the SMART technique for financial freedom is R for Realistic. You want to set a realistic goal for yourself which is well thought out and in line with your income, assets and expenses. . Paying too much towards a debt that is not in line with your income only results in the failure of reaching your SMART goal.

If you want to eliminate all of your $75,000 of debt in 3 months, that may or may not be realistic depending upon your income, assets and expenses.

Finally, the tail end of the SMART plan for financially stability is T for Timely. For instance, you need to plan a realistic time frame in which to become financially stable. Sometimes if you are not realistic in how much time if will take to pay down debt you may end up with stress as a result of too little time in which to achieve your goal.

Taking decades to pay off a debt may also not be the most Timely way to attain your financial goals.