Do you ever wonder what it takes to manage your personal finances well? This is a question I am constantly asking myself. So I created an acronym to help remind myself of the important aspects of managing finances.
SMART Money Management
Systems - How things get done
Measurement - Progress Made
Application - Getting it done
Results - Knowing what you want
Time - Periods to accomplish resultsSMART Money Management is a way to remember the 5 key components of managing your personal finances. Each component of SMART is equally important. For those who are married, having SMART conversations can help keep the two of you on the same page.
Let's dig a little deeper in to what each component of SMART consists of.
Systems - This is how every thing gets done in your financial life. From the simple things like buying groceries, to choosing how to pay for college, vacations, homes and cars. It also includes how you pay your bills and pick investments. The important thing about systems is to recognize that we all have them whether we have taken the time to set them up or not. In order to make better decisions it is important to evaluate your systems, and fine tune the ones that are not supporting your long term goals.
Measurement - The only way to know if you have made progress in your financial life, is to have objective measures. In most cases using a net worth statement is the most important tool to measure financial progress. The net worth statement is for your financial health, as your weight is an indicator of your physical health. It does not tell you everything, but it gives you some important clues about how you are doing.
Application - Getting it done! If there is no application in money management, then you can not expect to grow, but rather you should know that you will loose financial ground. It is important to actually take action on your plans. Often this means taking many small steps that will lead to significant impact. You can not wait until you have more money to take action, you must take action with what you have.
Results - Your desired results should be driving your systems, measurement and application. Results are all about knowing what you want to accomplish. If you do not take the time to decide on what you want, then you will never change what you are doing. Set some goals and start moving towards them. Your desired results will grow and change, but the important thing is to be working towards something.
Time - Without setting a period of time in which you want to get your results, you will never move towards the results you desire. When thinking about time, it is important to shoot for short term, intermediate, and long results.
*One special note. Don't let fear of failure stop you from defining the results you want and the time that you want to accomplish them in. You will make mistakes, but you will also have plenty of chances to adapt and set new desired results.
Good tool for our money management.
ReplyDelete