The SMART approach has been used widely to improve business action plans, business management and financial management. If you haven’t heard about this SMART saving plan, let me teach you how this plan works.
The SMART approach works on almost every situation that needs improvement. Each letter has a meaning and has a great impact for continuous improvement towards a goal.
I’ve been posting articles about how we can save money and how important planning is. But if we don’t follow a certain structure in doing a plan and setting a goal, it might end up a not so happy ending. Now let’s start with the first letter.
This means we have to apply the 5 Ws to get a specific goal in saving money. The 5 Ws are “Why”, the reason of saving money. “What”, this is the answer to why we save money, what do we want to accomplish, what do we want to save for. “Where”, do we have to save money in the bank, or have your own vault, or could it be just in a small piggy bank for you short term goal when saving money. “When”, when are you going to start saving; is it during holiday season, summer, spring or fall. “Who”, is there someone important in your life that you should start saving money for.
Example: Every time I get my pay slip from my part time job, I will save 50% from my pay. I will start doing this, this coming March 2012. I have to save money and open a savings account to prepare myself for my kid’s education plan. This is specific and it has all the 5 Ws.
When saving money, we have to make sure that it’s measurable. This means you have to keep a data of your income and expenses. These data will help you figure out how much percentage you should cut a share for your savings. This also means that for us to measure it, we should have some physical data. Therefore, you should keep invoices or receipts from all your purchases.
Our attitude comes in this letter. When we save money we have to make sure we get the goal we want. We have to be responsible in using and spending money. We have to learn how to cut off unnecessary expenses. Patience is also important, this way you won’t lose hope when saving money during difficult times. Patience will help you grab the goal.
Since we have to set a goal when it comes in saving money, we have to make sure that it’s realistic. This means that if you earn $500 a week, your goal in saving money is something you can accomplish. So if you get paid $500, you should save 20%-30% out of it and not 80% for savings because I’m pretty sure you can’t save 80% off a weekly paycheck. If you can, do it!
There should always be a time frame when saving. You don’t want to save money for a short time, because if you this, you’ll surely get nothing to save for your goal. Now if you save money for 1 year for your kid’s educational plan, you’ll end up saving nothing for that plan. The goal here is to create an estimate of how long you’ll be saving money for a specific goal. With the example above, if you start saving on March 2012 for your kid’s education plan, a timeframe for this can be 10 years from the start date.
This SMART approach can be very helpful in when we do business or even in life. And if you are having hard time saving money, start using this approach and get a smart saving. This approach can be applied for both long term and short term saving money goals.
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