Debt · Goal Setting · Personal Finance

SMART goals

Ever wondered who developed the SMART criteria of goal setting?

In 1981,  George T. Duran wrote a paper on how to write management goals and objectives. His aim was to guide top executives in helping their teams meet performance targets. The approach has since expanded to individuals who use it for their personal growth.

What areas then should one focus on when developing their goals? In his LifeScore Assessment, Michael Hyatt gives 10 possible areas of focus on i.e. Intellectual, Emotional, Physical, Marital, Parental, Social, Vocational, Avocational, Financial and Spiritual. And if you are honest with the assessment, you will find that the graphical presentation of results display the real areas where goals are needed most.

Financial management – and a key reason for this blog – is one of the areas that I continue to seek growth. It can be overwhelming, however, to work one’s way through graduate school, try knock off (large) debt, and save up for a home deposit all at once. And because of the weighty monetary inputs, the pursuit of one financial goal can easily sabotage the success of another. The best option would be to deal with one goal at a time and preferably the most desperate one.

According to a 2017 USA Today article, paying down debt continues to be one of the top 10 pressing financial goals for Americans. Not much statistic may be available on the stress levels that private debt has on Kenyans but the rising public debt levels could be an indication that the mwananchi could be suffering. The ‘get-out-of-debt‘ goal therefore looks like a good example to broach in this article and the SMART criteria is a good planning tool for this case.

  1. Specificwhat do you want to do? Just saying (better if you can write) that you want to get out of debt is not enough. You must define the exact debt so that it is a visible tackle for the mind e.g. pay off my outstanding 4 year car loan of KES 550,000.
  2. Measurablehow will you know when you’ve achieved it? If there are goals that cannot succeed without measurement, it is financial goals. Using a loan amortization schedule (available for free on MS Excel) is a good place to start. With it, you can plug in figures and find a combination that works best for your pocket e.g. an increase monthly loan repayments from KES 15,000 per month to KES 25,000 will reduce your loan period by 22 months and most importantly save you from paying an extra KES 82,000 in interest.
  3. Achievableis it in your power to accomplish it? Goal setting is a very dreamy process that can result in overly ambitious targets. Achievability will check whether you really can pay the extra ten thousand without getting into liquidity problems i.e. unable to meet other monthly obligations such as rent and utility bills. Achievability will also reveal some extra stashes of cash that could tremendously bring down the debt. Note that an increase in debt repayment by KES 1,000 only (US$10 at the moment and an amount that may be thought to be negligible in light of the loan amount i.e. US$5,500) can make a significant difference to a debt situation.
  4. Realisticcan you realistically achieve it? If the yes, feel free to go ahead with the goal. If no or unsure because of a major restructuring at work, it would be good to have a Plan B such as selling the car. It may not fetch as much as you purchased it for but if the adverse situation does happen, it will save you the huge headache of having an obligation that you can barely manage.
  5. Timelywhen exactly do you want to accomplish it? The loan amortization schedule mentioned above can help you set new deadlines. Not lazy deadlines that drive you downhill but ambitious ones that keeps you pressing on the gas pedal.

The actual goal would then read ‘Pay off my outstanding KES 550,000 car loan by June 25, 2021 through increasing monthly repayments from KES 15,000 to KES 25,000 and checking quarterly progress against the revised loan amortization schedule.’


EASY? Probably not as the process may be a little too detailed but it is much easier to work with a defined money goal. Remember “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it? For if you lay the foundation and are not able to finish it, everyone who sees it will ridicule you, saying, ‘This person began to build and wasn’t able to finish.’” Luke 14:28-30

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