SMART Goal Setting: Two Mini Goals Make a House

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