Debt happens to everyone. Consumers get into debt due to unforeseen circumstances such as disability, retrenchment, divorce or due to conspicuous consumption and poor money management. Most of the time however, consumers get into debt because of the latter. They fail to draw up a monthly budget and stick to it.
28 May 2013
DebtBusters is here to provide you with the following advice on how to set SMART financial goals in order to improve your financial situation and reduce your debt. SMART is an acronym that can be used to help you reach your financial goals based on reducing debt and means the goal you set must be: Specific, Measurable, Achievable, Realistic and Timely. It is essential you take the first step to gaining financial freedom and set financial goals best suited to your particular monetary situation.
Your financial goal must be specific, therefore meaning it must be distinct and include the “what, how and why” of your goal, in order to make sure that it is clearly understood. Setting a financial goal such as “to reduce debt” is not specific and may be difficult to achieve. An example of a specific financial goal associated with reducing your debt would be “I will pay off 80% of my credit card debt by December 2013”.
Financial goals must be measurable in order for you evaluate the progress against your goal and provide you with tangible evidence that you have accomplished your goal. Set yourself targets that are able to be measured on a weekly or monthly basis. For example, if you are only paying off the minimum instalment on your total credit card debt on a monthly basis, in order to get rid of your debt by your specified time and reach your goal, set yourself the measurable goal of paying a higher amount, such as double the minimum monthly amount. This way you can track your progress and make sure you are on the right path to paying off your credit card debt.
It is essential that your financial goals are achievable. Any goal worth achieving will require some sacrifices and will stretch you slightly so that you feel challenged. Is your financial goal achievable? Can you afford to pay a higher monthly instalment? Make sure you implement the appropriate steps to ensure you reach your goal. For example, you could draw up a budget to gauge where your income is going and how you can reduce your expenses and save money.
Financial goals must be realistic. By setting an unrealistic goal, you will simply be setting yourself up for disappointment. You need to make sure that the monthly instalment you are paying on your credit card is an affordable and realistic amount. It is not realistic to pay off an amount on your credit card, if you are still buying on credit. Your financial goal of paying off your credit card debt must be supported by using cash and debit cards for purchases and by not using your credit card while you are still paying it off.
Your financial goals must be linked to a timeframe, with a due date for achieving the goal that creates a practical sense of urgency. Your due date for achieving your goal is December 2013, which is realistic and achievable.
Bringing all aspects together of your SMART financial goal, it would read as follows: ”My financial goal is to pay off 80% of my credit card debt by December 2013. In order to achieve this I will draw up a suitable budget, pay double my minimum instalment on a monthly basis and will only use cash and debit card for my expenses”.
Set your SMART financial goals in order to take control of your financial situation. Call DebtBusters on 086 999 0606 or visit www.debtbusters.co.za for further financial assistance and advice on debt.