HNY to you all! I hope you had a good Christmas break. I dunno about you, but I like routine and am always itching to get back to things after Christmas. I had a busy time moving house this year, so it certainly wasn’t a break. It’s good to be back to the podcast though – have you missed the sultry sound of my voice these last three weeks?

Here we are at session number 42 , and we’re going to be talking about setting some New Year’s Goals. Not an original choice of topic, I know, but it’s a New Year, you have a fresh start – why not take advantage of it to set your financial compass in the right direction? Makes sense, right?

So as usual, we’re going to arm you with some decent information first and then give you the practical steps to proceed. I’m even going to be so bold as to suggest some resolutions for you, which you can take on board or ignore as you see fit!

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But first…

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Introduction

So the start of a New Year is a great opportunity to take stock and set some goals and targets for the coming year. If you made resolutions, chances are you have broken some of them by now. The usual suspects like lose weight, get in shape and stop smoking will fall by the wayside for many of us (not me – I have some news on that at the end of the show).

Resolutions are largely a waste of time because they’re not focused. They are vague. ‘Get fit,’ for example, has no structure to it. We can do better than this when setting our financial compass for the year ahead, so let’s dive in and look at what we need to know first.

Before I forget, you only really need to remember one link and that’s for the shownotes for this session. Everything you need is there including all the notes and any links I mention. It’s also the place to comment on today’s topic if you want to. The link is meaningfulmoney.tv/session42

Everything you need to KNOW

1 – Goals should be MT

Anyone who has spent any time in the corporate world has heard of SMART goals. SMART, as you might have guessed, is an acronym, so beloved of marketing wonks everywhere.

S – stands for Specific. In other words, a goals must be clear and well-articulated

M – stands for Measurable. As another management adage goes, you can’t manage what you can’t measure. Goals should have a number put on them so that success or otherwise can be clearly measured

A – stands for Achievable. I could have a goal to lose four stone by next week, but it isn’t going to happen. Four stone by the end of the year is another thing entirely. If a goal isn’t achievable, it isn’t a goal, it’s a pipe dream.

R – stands for Relevant. Unless the goal has some relevance to your life’s objectives, you won’t engage with it. A goal should move you forward in your general walk through life, and not come from left-field – if it does it will just be a distraction from the important things in your life.

T – stands for Time-bound. An open-ended goal will never be hit, so you must have a time limit as part of your goal, to keep from drifting.

So that’s SMART Goals and that’s all very well. But there’s some fat in that acronym which needs to be trimmed. Credit to the excellent Manager Tools podcast for this insight. By the way, that was the first podcast I ever listened to and it is genius to this day – it’s been going, I think, since 2005, and anyone who manages other people, should check it out.

The only two letters in the SMART acronym are M and T.

If a goal is M for Measurable, it is by definition Specific, so we can cut the S. If a goal isn’t A for Achievable then what’s the point? The same goes for R for Relevant, so I reckon we can drop both of those.

That leaves M for Measurable and T for Time-bound. MT goals. Manager Tools goals – geddit?!

So your financial goals for 2014 should be measurable and they should have time limits applied to them. If they don’t, they are not goals and you will not hit them. Measurable and Time-bound goals can have paths set to hit them – more on that in a bit.

Be ruthless with this. I have some examples for you in a bit, but for now, be thinking about the financial resolutions you have already made – do they qualify as MT Goals? If not, you should think about changing them.

2 – You need to connect with your goals if they are to mean enough for you to stick to them

I suppose this is where the R for Relevance comes into play, but I don’t think that word does the point justice really.

Abstract goals, goals which have no root in real life, will remain goals – you will never achieve them. But goals which have their roots deep into the fertile soil of your life plan will fire you up, massively increasing your chances of success.

In order to connect with your goals in this way, I think it helps to identify how you would feel if a) you hit your target and b) if you did not hit your target.

Does hitting the target fill you with a warm glow of satisfaction, or is it just, meh? If you fail to hit the target, will it knock you for six, or just be a minor inconvenience?

At the risk of sounding all Zen or something, I don’t naturally get on with all this talk of feelings, particularly where money is concerned. But that’s just me personally. I know from experience with clients that money is a powerfully emotive subject.

Try to connect positively with your emotions about money – maybe the psychology of money is a subject for another session. Try to keep negative emotions in check, or channel them to provide the impetus to succeed. The fear of failure is a powerful motivator if it is channelled correctly.

3 – The process, not the goal is the important thing

Yes, I’m aware that this could sound like I’m undoing all the stuff I’ve just been saying, but I reckon one of the reasons that most resolutions fail is because they are expressed as I will or will not do something forever, starting now. Forever is a hell of a long time to commit to when half-cut on New Year’s Eve.

A goal, by contrast is a marker, a line in the sand at some defined point in the future. You work towards this goal in small steps, which by definition are more achievable. Small successes and quick wins are powerful motivators to keep going. That’s why weekly weight-ins and encouragement from the group are such a winning formula for slimming clubs.

So if you have a measurable, time-bound goal, you can work back from that to determine what you need to do this week. Or today. Or this morning to move forward towards your goal. Instead of focussing on a big target at some point in the future, you only have to concentrate on right now, which works far better.

The psychology of goal-setting is that those small steps can become habitual and embedded for life. So it is the process of getting to the goal that really matters and where the major life-changes can be found.

4 – Accountability helps

Another aspect of the slimming club model, the accountability of the group, can be a help to your in your path towards hitting your financial goals. Arguably, money is even more of a sensitive subject than body weight, so I’m not suggesting you go to a weekly meeting in the Church Hall and get out your bank statements for scrutiny by someone called Trish. (She was my WeightWatchers leader, and she was brilliant, even if I wasn’t).

Maybe you could enlist your mate to ask you how you are doing every other week over a quiet pint. They could ask specific questions about whether or not you have done the necessary things you need to do. Someone who is financially savvy themselves would be great, just pick someone sympathetic. Or you could choose someone who faces similar challenges to yourself and you could help each other. For accountability to work there has to be trust on both sides and a willingness to give, and more importantly to graciously receive feedback. So choose your accountability partner wisely.

This will either resonate with you and you’re already thinking of who you could ask, or it’ll leave you ice cold. So I won’t spend any more time on it, but I hope it gives you some food for thought.

Summary – What you need to KNOW

We now know that:

#1 – Goals should be MT, and not SMART because that’s just so much fluff

#2 – You need to connect with your goals if you are to stand a chance of achieving them

#3 – The process, not the goal itself is what really matters

#4 – Accountability helps in keeping you on the straight and narrow over time

So, armed with this information, what do you need to DO to move forward in setting and working towards your financial goals for 2014?

Everything you need to DO 

I’m going to be so bold as to suggest some goals now. These may or may not be relevant to you, but hopefully by going through them you can follow my thought process and apply it to whatever your goal is for this coming year.

1 – Keep to a budget, every month, and never spend more than you earn

The first thing to ask is whether or not this meets our MT criteria. Well it is Measurable in that you know what your income is and not spending more than that is a clear, binary outcome. You either achieve it or you don’t. It isn’t really Time-bound though. ‘Every month’ is a forever statement, and those should be avoided.

The problem with this is that it smacks of a resolution, rather than a goal. If spending less than you earn is the goal, then I would start by putting a figure on how much less than your income you want to spend each month. Let’s say that’s £100. You could then re-word this goal as follows:

I want to save £100 per month, every month without fail so that I will have saved £1,200 by the end of the year. That works. It gives you something to hit each month, or even each week if you want to.

2 – Restrict my spending on clothes to £50 per month, every month

If setting a goal for your entire budget sounds a bit much to grapple with – maybe next year – why not set a goal for just one line on your budget? If you don’t currently have a clear budget for spending on clothes, say, then you could restrict yourself to a fixed amount every month. That’s measurable, and time-bound, so it qualifies.

You’ll get a kick out of sticking to your budget for that line each month. You could even accrue the money from one month to the next. So you could spend nothing on clothes for three months and then have a splurge in the sales, blowing £150 in one month.

But this will only work if you put the money aside on the first two months, otherwise your budget will be all to pot. If you want, you can literally pull out the money from the cash machine and put it in an envelope, somewhere safe, obviously. In fact, I highly recommend this. There is something very practical and visceral about spending cash – much more so than spending on plastic. And though cash is inevitably doomed eventually, while it is still around there is much to be said for using it to force you to stick to a budget.

3 – Save £1,500 by 31^st December 2014

We’ve kind of covered this in the reworking of the first goal. But I mention it again because this gives you chance to start from the goal and work back. The goal is measurable and time-bound for sure – but how are you going to get there?

The logical way is to divide the target amount by 12 months and save that much every month. But you might have a more imaginative way of doing it. Maybe you could have a different amount to save each month, perhaps saving less on a month where another big bill is due and more on a lighter month.

The only thing I would say is that it might be better to connect the goals with something tangible, a kind of reward. The reward might be to write the cheque to your ISA for the amount you have saved. Or it might be to buy something with the money. Either is fine, whatever floats your boat, but you are more likely to connect with a tangible something rather than a figure on your bank statement. Better connection = better chance of success.

4 – Go on holiday in September without putting the cost on a credit card

Clearly this is a time-bound goal – you’re going on holiday in September. It’s measurable too – the value on your credit card will be zero.

Again, you’ll need to work out how to get there. If you are paying for the holiday in instalments then this might be done for you.

But how much better will it be lying on that beach knowing that there will be no bill landing on your mat two weeks after you get back – lovely!

5 – Save for Christmas by putting £100 aside every month from January to November

This has been standard practice in the Matthew household for years. It’s classic pay-yourself-first stuff. You get paid, you put the money aside and then budget what’s left.

The goal is time-bound because you have a time limit of November, and it is measurable because you have a monetary amount on it.

As I mentioned before Christmas, work out what you spent on Christmas this year, see if you can make savings if you want to, then you have a cost for Christmas which you need to save up. Divide this by eleven and then set up a standing order to save the money each month into a different account, or take the money out of your account each month and save it in an envelope. Just make sure you keep it safe. Speaking of which, there’s an antique safe in my new house – here’s a picture. How cool is that?

Even better than dividing the target goal by eleven, divide it by ten and then save eleven month’s worth. You’ll automagically build yourself a 10% contingency fund so you buy extra nice crackers.

Resource

I wanted to mention a resource that I am currently benefitting from. You may have heard me mention Michael Hyatt before. He has a superb podcast called This Is Your Life that I listen to regularly. He blogs and speaks about leadership, productivity and the like and he has just released a goal setting course to start the New Year. You can find it a bestyearever.me. It isn’t cheap at $194 split into two payments of $97; I got in on the early bird deal, paying just $97 for the course. It basically gives you a workbook and some videos to help you get really down and dirty with your goals for the year. But Michael has years of wisdom to impart on the whole subject of goal setting.

You probably don’t need it for basic financial goals like those above, but you might want to check it out if you’re planning to go deeper into your goal-setting for the year. I don’t gain anything if you sign up; it’s not an affiliate deal or anything, but I do recommend you give it a look-over.

Session Close

I hope that this session has given you some food for thought, and some ways of thinking which will inspire you to make some financial changes – if you need to – this year. I’d love to hear what your goals are, and how you’re doing keeping to them.

You can email me on pete@meaningfuloney.tv or better still, leave a comment under the shownotes at meaningfulmoney.tv/session42 so that everyone can benefit from your challenges and successes.

This week’s reviews

Two new reviews over the Christmas break – thank you first to Hoylaker who says:

“I listen to a variety of podcasts: Property Podcast, Property Radio, Motley Fool, Music Weekly, Moral Maze on my commute to Portsmouth but this always rates as my number one. The presentation style is constantly high with a great mix of humour and advice which motivates. Brilliant Pete, thanks and have a great christmas (within your budget).”

Fantastic! Thank you so much – that’s high praise indeed! Secondly we have Chance Last, who says:

“I always enjoy your podcasts and learn something new each time. Thank you so much.”

Well, Chance, that’s what I’m here for, and I’m glad you’re benefitting from the show.

If you want to be mentioned on the show then please do consider leaving me a review on iTunes. It’s the best way you can show your appreciation for what I’m doing here. Failing that you can shower me with gifts of money, that’s fine by me! Click the button below to leave your review

News

Not sure if this is really news or not. You know that I have moved house now and am settling into the new place with my family. I’ve also crossed a major milestone at work, retiring off the last of my senior colleagues so that the company is now in the control of myself and my three next-generation colleagues. So that’s two major headaches from 2013 ticked off, right at the end of the year.

So now my mind turns to another major goal which is a constant battle, and that is my weight.

I’ve always tended towards being a fat bloke, and it is the one area of my life where I have let my self-discipline slip. Annoyingly, 18 months ago I was under 16 stone and could run five miles in 8-minute mile pace, three times a week.

An old knee injury which ended up needing surgery and extended physio stopped me from running, which I love, and self-pity and lots of excuses meant that I have put on a shedload of weight, and now tip the scales at – wait for it – 18 stone 3 pounds. That’s around six stone overweight, according to the BMI scale.

Clearly I need to do something about this; it’s now getting hard to tie my shoes – seriously – and I doubt I could run 500 yards without having a coronary.

I now have an eating plan in place and have joined the gym which is 300 yards from my new house. For those of you living in the big city, I’ll make you jealous by telling you that the gym costs £2.25 a session! In 13 months’ time, February 2015, I will be 40 years old, and so my target is to be 14 stone by my 40^th birthday. That’s just over a four stone loss or 60 pounds in 13 months. That’s only a pound a week, which when you put it that way doesn’t sound so bad.

I pledge to here on this podcast that every week I will update you as to my weight so that you can hold me to account. If I stop letting you know, you have my permission to bombard me with emails telling me to get my act together and stop being a hypocrite. How can I preach about goal setting unless I stick to my own goals?

Can you hold me to account on this? Thanks.

Next Session Announcement

Next time we'll be talking about classic investor mistakes and how to avoid them. If you have a question on this subject, or any other financial query that you want answering here on the show, then the best way is to leave me a voicemail at meaningfulmoney.tv/feedback

Outro

That's it for this session of the MM podcast, I hope it was helpful. Did I miss anything? Do you have any questions? If so, please leave them comments or questions in the comments section below.

I hope you enjoyed this session. Thanks for listening – I'll talk to you next time. And as my old WeightWatchers leader Trish used to say at the end of every meeting: I’ll see you lighter!