What They Don’t Teach You in School: Money Management and Laying Out Your SMART GOALS (Part 2)

Special contribution to RentReporters blog

By: Sue Katz, American Consumer Credit Counseling

In my last blog post we discussed how to set SMART goals. What are SMART goals? The acronym stands for Specific Measurable Attainable Realistic and Timely. Today we’ll discuss how to get in action to meet those goals.

To get started you will need a specific goal in mind. I use purchasing a car in my example, but your goal may be paying down a credit card or buying a new cell phone. Once you have your goal, look at your budget to make sure that your goal is realistic and attainable. If not realistic and attainable, one must reassess the goal. Maybe that means downsizing the goal to something more affordable – or, in some cases, it may mean setting the goal aside for now. When assessing the overall affordability, it is important to distinguish what you need from what you want.

Example: Let’s start with a car as a good example of needs vs. wants.  Many of us aspire to purchase that fancy car but it rarely has a relationship to our true needs. Transportation is a basic need and must be included as part of our budget but that doesn’t necessarily mean car. If you live in the city, you may be able to use public transportation, but if you live in the suburbs or a rural area, perhaps a vehicle is necessary.

If you do need a vehicle you will need to ask whether you should purchase a new vehicle — which is something I never recommend. According to Consumer Reports, the average lifespan span of a vehicle is approximately 8 years. The Kelly Blue Book suggests that the average cost of a new vehicle is $37,851. Let’s round up to $ 38,000 and divide that by 8 years. That comes out to $4,750 per year to own the car (not including interest).

According to Motor Mall, the same car that is one year old used car will cost about $7,500 less. If we do the math again, $30,351 divided by 7 years is $4,336. With this used car, you would save $414 dollars per year.

I recommend considering a car that is a few years older and in the price range of $10,000-13,000. If I keep it for 4 years, for example, $10,000 divided by 4 years is $2,500 per year, much more budget-friendly. Staying on budget is the most important consideration. Remember, being frugal and realistic about what is of value – what is a true need rather than a want you may not be able to afford – can help you break down those dreams into SMART goals you can obtain!

Sue Katz is Community Outreach Coordinator with American Consumer Credit Counseling and a Certified Credit Counselor & Educator.