One reader paid off thousands in credit card debt by turning a business goal-setting framework on her finances. Here’s how the SMART method can map your own path out of debt.
1 One Reader’s Path Out of Debt
Shatoria Smith was tired of the $5,000 in credit card debt she felt was blocking her from reaching her financial goals. She couldn’t see an easy path to being debt-free, so she drew herself a map by adapting a goal-setting framework she’d first heard about in a college business class: the SMART method.
“The SMART goal framework helps you dig deep and devise a plan of how to actually accomplish it,” 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 for helping businesses set performance objectives. Over the years, it has been adapted for goal-setting situations beyond the workplace. Smith applied it to her finances in late 2014.
2 What It Means to Be SMART
As originally laid out by Doran, the SMART acronym calls for goals to be specific, measurable, assignable, realistic and time-related. Here’s how to apply it to credit card debt:
Specific: Define exactly what you want to accomplish and how you will do it. Smith set a different strategy for each of her three credit cards. For one of them, she wrote that she wanted to pay off $2,450 within a year so she could free up money to pay student loans. Her budget included $300 every month toward that goal.
Measurable: Track your progress. You could do so with pen and paper, a spreadsheet, an app or whatever works for you. Smith used an app with a goal-tracking feature.
Assignable: Make clear where responsibility lies at each step. This is especially relevant if you’re paying down debt with a partner. (Some modern versions of SMART replace “assignable” with “achievable,” meaning the goal should be realistic.)
Realistic: Set goals that are achievable with the resources available. You can dream big, but the smaller steps that lead up to that dream should be within reach. At this stage, stop using credit cards while paying down debt to get results. (Some versions replace “realistic” with “relevant,” meaning the goal is worth pursuing.)
Time-related: Set a deadline. The timeline should be based on what you can do, not just your desires. Smith says she crunched the numbers to establish the deadline that she met toward the end of 2015.
3 Confront Your Budget
Getting an accurate picture of your finances, such as overall expenses and the money available to pay down debt, is the 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 way different than what they actually do,” Hagerman says. “That’s why it’s important to take a step back and say, ‘How have I spent my money over the last 30 days?’”
Once you get that accurate picture, he says, you may need to revise your original goals.
You can also consider get-out-of-debt strategies if you can’t keep up with your debt payments. For instance, you might consider transferring a balance to a new credit card with a 0% introductory offer, consolidating debt to a personal loan or seeing if you qualify for a credit card hardship program.
4 Unpack Your Motivation
No matter how well-defined your goal, it’s only achievable if you’re motivated enough to put in the work. A 2019 study in the Journal of Financial Planning found that establishing an emotional connection to an item of sentimental value could motivate people to save more money. The same idea could apply to credit card debt, according to a contributor to the study, Bradley Klontz, a financial psychologist and associate professor at the Creighton University Heider College of Business.
For example, to eliminate debt to fund your kids’ college, a photograph of your kids in your wallet or on a mobile device could guard against goal-shattering purchases.
“It really helps anchor our emotions and our values to what essentially requires us to override our natural wiring,” Klontz says. “The way to override that is to actually have something that is more important, so then the sacrifice becomes easy to make.”
You can also name your goal. Try something like, “$5,000 to Debt-Free and Stress-Free,” and change the number as the debt shrinks. It’s harder to steal from a goal when its name has an emotional attachment, he says.
This article was written by NerdWalletand was originally published by The Associated Press.
Melissa Lambarena is a writer at NerdWallet. Email: mlambarena@nerdwallet.com. Twitter: @LissaLambarena.
The article Wipe Out Credit Card Debt by Setting SMART Goals originally appeared on NerdWallet.
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Frequently Asked Questions
What does SMART stand for in goal setting?
As originally laid out by management consultant George T. Doran in the early 1980s, the SMART acronym calls for goals to be specific, measurable, assignable, realistic and time-related. Some modern versions swap “assignable” for “achievable” and “realistic” for “relevant.” It was created to help businesses set performance objectives and has since been adapted for personal finance goals like paying off credit card debt.
How did Shatoria Smith use SMART goals to pay off her credit card debt?
Smith was tired of $5,000 in credit card debt, so she adapted the SMART method to her finances in late 2014. She set a different strategy for each of her three cards, budgeted $300 a month toward one $2,450 balance, tracked her progress with an app, and met her deadline toward the end of 2015. She described herself as very motivated throughout.
Why is confronting your budget important for setting SMART goals?
Getting an accurate picture of your finances, including overall expenses and the money available to pay down debt, is the key to setting SMART goals, says certified financial planner Adam Hagerman. People often think they spend far less than they actually do, so it helps to step back and review the last 30 days of spending. Once you have that picture, you may need to revise your original goals.
How can motivation help you stick to a debt-payoff goal?
A goal is only achievable if you are motivated enough to put in the work. A 2019 study in the Journal of Financial Planning found that an emotional connection to a sentimental item can motivate people to save more, and the same idea can apply to debt. Financial psychologist Bradley Klontz suggests anchoring your emotions to something more important, like a photo of your kids, to make sacrifices easier.
What are some options if you cannot keep up with your debt payments?
If you cannot keep up with your debt payments, you can consider get-out-of-debt strategies. For instance, you might transfer a balance to a new credit card with a 0% introductory offer, consolidate debt into a personal loan, or see if you qualify for a credit card hardship program. Naming your goal, such as “$5,000 to Debt-Free and Stress-Free,” can also help you stay on track.
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One reader paid off thousands in credit card debt by turning a business goal-setting framework on her finances.
Shatoria Smith was tired of the $5,000 in credit card debt she felt was blocking her from reaching her financial goals.
SMART was created by management consultant George T.
As originally laid out by Doran, the SMART acronym calls for goals to be specific, measurable, assignable, realistic and time-related.
Getting an accurate picture of your finances.
“What people think they spend is usually way different than what they actually do,” Hagerman says.
Once you get that accurate picture, he says, you may need to revise your original goals.
You can also consider get-out-of-debt strategies if you can’t keep up with your debt payments.
No matter how well-defined your goal, it’s only achievable if you’re motivated enough to put in the work.
For example, to eliminate debt to fund your kids’ college, a photograph of your kids in your wallet or on a mobile device could guard against goal-shattering purchases.
“It really helps anchor our emotions and our values to what essentially requires us to override our natural wiring,” Klontz says.
You can also name your goal.
This article was written by NerdWallet and was originally published by The Associated Press.
Melissa Lambarena is a writer at NerdWallet.
The article Wipe Out Credit Card Debt by Setting SMART Goals originally appeared on NerdWallet.
As originally laid out by management consultant George T.
Smith was tired of $5,000 in credit card debt, so she adapted the SMART method to her finances in late 2014.
Getting an accurate picture of your finances, including overall expenses and the money available to pay down debt, is the key to setting SMART goals, says certified financial planner Adam Hagerman.
A goal is only achievable if you are motivated enough to put in the work.
If you cannot keep up with your debt payments, you can consider get-out-of-debt strategies.
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