The S.M.A.R.T. Way to Save for Large Purchases
By Jenny Schaub, Program Coordinator, Hancock County Saves, OSU Extension Hancock County
Summer just ended and I’ve already started thinking about next year. Taking a beach vacation will my “big purchase” for the year, which leaves several months to plan ahead to save for this expense. But am I prepared? Do I have a timeline? Do I have a SMART goal set? My answer to all of these questions is a resounding “YES!” But what is a SMART goal?
A SMART goal is a clearly defined action plan that will get you to a specific and measurable result. In essence, SMART goals are roadmaps based on your choice of starting and ending points. Statistically, our society believes that goal setting is important, but less effective unless you write them down. It has been shown that if you write down your goal you are 80% more likely to reach that goal. While there is never a guarantee that you will definitively reach your goal, what a SMART goal doesdo is provide you with specific and actionable items with a clearly defined timeline. Using my beach vacation as an example, let’s walk through how to set up a SMART goal for yourself:
- S – SPECIFIC: I’ve done my research, and a beach vacation for me and my family next July will cost at the most $3,500. My specific goal is to save $3,500 to pay for this vacation by April 15, 2016 (8 months). This will allow for me to have more than enough to cover the cost. I estimated and made my goal using the high end of the estimated cost for that time of the year.
- M – MEASURABLE: This specific goal was set with a start date of August 15, 2015; a timeline of 8 months to achieve my savings goals. In reviewing my current budget, I know that am able to save $300 per month, times 8 months, with an additional (approximate) $1,100 coming from my 2016 tax return. My goal is measurable – each month I can look at my savings and see if I am on track.
- A - ATTAINABLE: Prior to setting this goal and timeframe, I sat down with my co-spender to determine what we could afford each month. We looked at a full year’s worth of income and expenses, compared highs and lows and what we could conceivably afford without putting our budget at risk or disrupting our established emergency savings.
- R – RELEVANT: Is this goal relevant to what I want to accomplish in the next 8 months? Yes. Being able to provide my family with a new experience without going overboard on a budget is important to me.
- T – TIMELY: Is there a deadline? Yes; this goal has an end date of April 15, 2016. By allowing myself the ability to schedule a trip before it’s considered “last minute” is important to me. Eliminating the stress of a wait and see approach is something that I considered when selecting the deadline for this specific goal.
SMART goals help to focus energy, time, and strengths on achievable and realistic goals – eliminating wasted time and efforts. Having a specific, written goal will help you to plan for those big purchases. Whether it’s a family vacation, new car, new appliance, or down payment for a home. Having a specific and actionable road map to get there will help steer you to that destination.