Good day friends!
I’m back with the second installment of my
SMARTing series.
Today I’m talking about my big goal of buying a house and the two mini goals
I’m creating to get Leon and myself financially secure enough to buy a house.
This is going to be kind of a long one, so grab some coffee.
Or grab a drink and we’ll turn this isn’t a drinking game. Drink every time you
read the word “goal.” I promise you’ll end up drunk by the end of this post.
SMART Goal Setting: Two Mini Goals Make a House
If you read the
first post on the basics, you already
understand the process of setting SMART goals. (Drink!) If you haven’t read the
first post, I would suggest going back and starting there. Setting SMART goals
isn’t rocket science, but a little extra pre-preparation never hurt anyone.
So for the sake of
re-Secreting: my goal is to buy a house
in the next 12-18 months. To do that Leon and I need to pay down some debt –
mostly student loans – to improve our debt to income ratio (which I’ll be
referring to as debt:income from now on) and save as much as possible to use as
a down payment.
Step one: tackling debt.
Leon and I are not going to pay all our debt off before
buying a house. College is expensive and we’re not suddenly making six figures
each, so making that goal would be unRealistic. Instead, we’re making the goal
of paying off our two smallest loans and putting a dent in the other two.
Below is the layout of our SMART goal.
(Caveat: I’m not going to share the real dollar amounts of
our goals/debt. Your debt and goals are different from mine; so knowing mine
will only serve to feed your voyeuristic nature. Also, fake numbers make for
easier math.)
Specific: Pay down $15,000 in debt.
Meaningful: Aggressively paying down debt will improve our
debit:income and get us one step closer to our house.
Measurable: Dollars are very measurable. And the spreadsheet
with specific monthly dollar amounts for each loan is also very measurable.
Action-oriented: We have $8000 in savings, so once we take
out $2000 to use as an emergency fund, we’re plopping $6000 directly into debt.
That will be our payment for the first month and leave us with $9,000 to pay
down. From there we’re going to put $825 towards debt for the remaining 11
months. This will cover more than the minimum monthly payments and we’ll make
the payments in a
Dave Ramsey Snowball fashion. (That link is to an explanation
of Ramsey’s Debt Snowball.)
$6000+($825*11)=$15,075
Yes, I realize that this is more than our goal, but I like
easy numbers. So instead of paying $818.19 per month, we’re paying $825. An
extra $75 won’t kill us, though.
Realistic: We built a strict, but doable budget. We built a
little wiggle room for fun into our budget, plus we have that emergency fund to
cover unexpected expenses.
Timely: We are giving ourselves 12 months to do this and we
will be able to check in each month. I even made an awesome spreadsheet to hang
on the fridge and every time we make a payment as planned we get to put a
sticker on the spreadsheet.
Step two: saving as much as humanly possible.
This goal isn’t quite as set in stone as our debt goal. This
goal represents the bare minimum since more savings is definitely a good thing,
whereas we figured out that there isn’t much benefit to paying down more debt
at the expense of our savings.
Specific: Save at least $16,000.
Meaningful and measurable: The amount that we save directly
impacts the amount we can pay for a house, since we want to put a large
percentage down. So this is a hugely meaningful goal. And again, dollars and my
nerdy spreadsheets are immensely measurable.
Action-oriented: Our budget has allowed for $2250 per month
to be put towards debt and savings, so with our debt plan in place we’ll have
$1425 per month to put into savings. We’re going to start this goal a month
after we start our debt goal so that we have money for all those fun moving
expenses, so we’ll have 11 months to get to our goal.
$1425*11=$15,675
This still leaves a $325 gap, but I’m anticipating with
birthday money and wedding gifts and Christmas bonuses and picking up change
off the street, we’ll be able to make up that gap and then some.
Realistic: This amount is just a hair below being difficult.
So $16,000 is without a doubt obtainable. Like I said before, though, this
amount is the bare minimum.
Timely: Our plan for this mini goal runs for 12 months.
Since our over-arching house buying goal gives us 12-18 months to buy a house,
if we find that after 12 months we want to build up more of a down payment
we’ll continue the same debt and savings plan for another 6 months.
Okay! Those are my mini goals. They are not exactly fun,
because living with a super tight budget is pretty much never fun. They
definitely don’t guarantee that we’ll be successful in buying a house, but we
still stand a significantly better chance if we can stick to these goals (or at
least in very close proximity to these goals). And that makes it worth it to
me!
If you read all the way through to this point you are
amazing. And if you were playing the drinking game version you are very drunk,
because I said “goal” 23 times. Either way, thank you!
Cheers, Kara
