SHatoria Smith was fed up with $5,000 in credit card debt that she felt was preventing her from reaching her financial goals. She didn’t see an easy path to debt-freedom, so she mapped herself out by adapting a goal-setting framework she first heard about in a college business class. : the INTELLIGENT method.
“The SMART Goals Framework helps you dig deep and devise a plan to get there,” says Smith, who lives in Florida and writes about debt, budgeting and personal finance on her blog, Coin Countin Mama. “I was very motivated”
SMART was created by management consultant George T. Doran in the early 1980s as a tool to help companies set performance goals. Over the years it has been adapted for goal setting situations outside of the workplace. Smith applied it to his finances in late 2014.
What it means to be SMART
As originally stated by Doran, the acronym SMART refers to specific, measurable, assignable, realistic and time-bound goals. Here’s how to apply it to credit card debt:
- Specific: Define exactly what you want to accomplish and how you are going to do it. Smith defined a different strategy for each of his three credit cards. For one, she wrote that she wanted to pay off $2,450 in one year so she could free up money to pay student loans. His budget included $300 per month to achieve this goal.
- Measurable: Track your progress. You can do this with pen and paper, a spreadsheet, an app, or whatever works for you. Smith used an app with a goal tracking feature.
- Attributable: Make it clear where the responsibility lies at each step. This is especially relevant if you are repaying a debt with a partner. (Some modern versions of SMART replace “assignable” with “achievable”, which means the goal must be realistic.)
- Realistic: Set goals that are achievable with the resources available. You can dream big, but the small steps that lead to that dream must be within reach. At this point, stop using credit cards while paying off your debts to see results. (Some versions replace “realistic” with “relevant,” meaning the goal is worth pursuing.)
- Time related: Set a deadline. The schedule should be based on what you can do, not just what you want. Smith says she crunched the numbers to establish the deadline which she met towards the end of 2015.
Compete against your budget
Getting an accurate picture of your finances, such as overall spending and money available to pay off debt, is key to setting SMART goals, says Adam Hagerman, a Maryland-based certified financial planner and educator who uses the method. to help clients meet financial goals.
“What people think they spend is usually very different from what they actually do,” says Hagerman. “That’s why it’s important to take a step back and say, ‘How did I spend my money in the last 30 days?'”
Once you get that precise picture, he says, you may need to revisit your initial goals.
You can also consider debt strategies if you cannot meet the repayment of your debts. For example, you might consider transferring a balance to a new credit card with a 0% introductory offer, consolidating debt into a personal loan, or seeing if you qualify for a credit card assistance program.
Unpack your motivation
Even if your goal is well defined, it is only achievable if you are motivated enough to put in the work. A 2019 study in the Journal of Financial Planning found that establishing an emotional connection with an object of sentimental value can motivate people to save more money. The same idea could apply to credit card debt, according to study contributor Bradley Klontz, a financial psychologist and associate professor at Creighton University Heider College of Business.
For example, to eliminate debt to fund your children’s college, a photo of your children in your wallet or on a mobile device could protect you against purchases that smash your goals.
“It really helps anchor our emotions and values to what essentially forces us to override our natural wiring,” Klontz says. “The way to get past that is to have something more important, then the sacrifice becomes easy to do.”
You can also name your goal. Try something like “$5,000 for debt-free, stress-free debt” and change the number as the debt goes down. It’s harder to steal a goal when its name has an emotional attachment, he says.
This article was written by NerdWallet and was originally published by The Associated Press.
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Melissa Lambarena is a writer at NerdWallet. Email: [email protected]. Twitter: @LissaLambarena.
The article Wipe Out Credit Card Debt by Setting SMART Goals originally appeared on NerdWallet.
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