I detest setting goals because I view them as a stark reminder of my financial inadequacy. These words by Christine Benz shook me out of my financial lethargy: “You know how it is when you don't start a day with a to-do list. You get buffeted around by whatever comes up: phone calls, answering emails, chatting with colleagues. Managing your finances without first articulating your near- and long-term goals is pretty similar. The days will go by, and you'll no doubt find plenty of ways to spend your money. But you won't necessarily get to where you really wanted to go.”
That’s when I realised that I was approaching it the wrong way. The problem was not with my goal, but how I was framing it. By focusing on what I would have to sacrifice to attain that big amount, I put a mental and emotional roadblock in my path. So I turned it around and began to think of what I wanted to achieve. Then the apparent sacrifice is not punitive, but a means to getting what you want.
My colleague in Italy, Sara Silano, suggested I employ the SMART (Specific, Measurable, Attainable, Realistic, Time bound) goal strategy. Here’s how I put it into action.
1. Specific: To get motivated, you need to be clear on what you want your money to do for you. Behavioural scientist Daniel Crosby explains why it helps to be richly pictorial and frame intentionally. “Food with a more descriptive label - Belgian Black Forest double chocolate cake - is perceived as more satisfying and delicious than just a chocolate cake.” First, I put down my goal as saving for a holiday. That was vague. I visualized it in vivid detail – I want to go on an African safari, AND on a hot air balloon ride. It’s okay to start with ambiguous, but ensure you get specific. Morningstar behavioural researcher Sarah Newcomb recommends using visualization strategies when thinking about retirement. “When you think about what your life in retirement will look like, force detail into the picture. What will your home look like? How do you see your travel plans? What sort of social life do you envisage? This will provoke you into action.”
2. Measurable: You need a clear idea of what success is. For instance, I will have to do some homework to find out what my dream vacation will cost. I will also have to budget for airline tickets, visa costs, and overseas medical insurance, before coming up with a realistic number. If the goal is a few years down the road, I will need to account for inflation.
3. Adaptable: Nothing is written in stone, and if you are willing to adjust your expectations, a lot more is achievable. The one package that caught my attention was around $8,000 to South Africa. That almost made me give up. That is why a framework like this helps; you are forced to rationalise and adapt accordingly. Did I have to go to South Africa, which is known to be more expensive than Kenya or Tanzania or Namibia? The above tour was a private expedition, where the service level was premium. There was no need to opt for either. Also, it was around 10 days, when a safari can be done in a shorter time frame. There were plenty of economical options once I got flexible.
4. Realistic: This is the most difficult. When you have a dream, you don’t want to be realistic. When you get too pragmatic, you can’t realize your dream. Here is the question I posed to myself: Based on my monthly income and expenses, what are the discretionary funds that I can contribute to this goal? Using that as a broad guide helps stay within one’s boundaries.
5. Time-bound: I may set my goal for 2022 but may be unable to save enough in 18 months. In that case, I have no choice but to push my goal to 24 months. Your clearly defined timeline is not just when it is convenient for you, but when you have accumulated the required capital. Remember, it is not just saving for one goal. Numerous goals clamour for our attention and capital, both of which are limited in supply. I have my retirement goal running parallel with this holiday goal. And there is no way I am going to start saving less for retirement just to achieve this travel goal.
The framework provided by SMART goals does help in pushing up your chances of success. And if you want to be intentional in what your money offers you, you need to sit down and get clarity on your goal. Remember, the days are long but the years are short. Make your money work for you.
