Real world: SMART goals
About this video
In a comedy game show, host Kevin helps Bobby turn the vague resolution 'save more money' into a SMART goal: specific, measurable, achievable, relevant and timebound. Bobby ends up planning to save $50 per paycheck for 10 months to reach $1,000 for a trip to Toledo, while eating out only once or twice a week.
You'll be able to
- explain what each letter of SMART stands for in this video.
- turn a vague money goal into a SMART goal.
- calculate how long it takes to reach a savings target at a set amount per paycheck.
Key words
- SMART goal
- A goal that is Specific, Measurable, Achievable, Relevant and Timebound.
- Specific
- Clear and detailed about exactly what you want to do with the money.
- Measurable
- Has a number you can track, like how much money to save.
- Achievable
- Possible with your income without cutting into rent, food and everyday expenses.
- Relevant
- Only changing what you need to in order to meet the goal, based on why you set it.
- Timebound
- Has a deadline by which you will reach the goal.
- Take-home pay
- The money you actually receive in your paycheck.
Transcript
- [Presenter] It's "Real-Life Money Puzzles." The surprise game show. Our host Kevin Szymanski is somewhere in this home just waiting for Bobby, our unwitting contestant to make a classic money blunder. He's on the phone with his mother.
- [Maria] Bobby, hon, if you're not happy, then you gotta come up with a way out of it. Your father and I can't help you. For one thing you're too far away. And for another, this isn't something we have the ability to fix.
- [Bobby] I just feel like I don't have enough money for things that I need, let alone things that I want.
- [Maria] So you keep telling me. - [Bobby] And when I do get money, it just feels like it evaporates immediately.
- [Maria] Money always finds somewhere to go, sweetheart. But you gotta get your finances in order. If you're not happy in how you're managing your money, you need to come up with a plan.
- [Bobby] Okay, I resolve to save more money. How does that sound? Is that a plan?
- Yeah. - Ah! - [Kevin] It sounds wrong, Bobby.
- [Bobby] What the heck? Were you hiding in my refrigerator?
- [Kevin] I sure was. - [Bobby] How long have you been in there?
- [Kevin] Long enough to hear you get off on the wrong financial foot, my boy. You've got a real-life money puzzle on your hands.
- [Maria] Oh my gosh. Is that Kevin Szymanski? Bobby, baby, put me on speaker phone. Kevin. Kevin, I love your books.
- Hi, Maria. - He knows my name. - [Kevin] Bobby, I hate to tell you this, especially with your mother on the phone, but you're not being very smart about your goal right now.
- [Bobby] Wow. Rude. - [Kevin] You misunderstand me, Robert. A smart goal must be S - specific, M - measurable, A - achievable. R - relevant, and T - timebound if it's gonna be successful. Let's play back what you said, all right?
- [Bobby] Okay. I resolve to save more money. What in the name of? Were you recording me?
- [Kevin] Specific. A good goal needs to be granular. Don't say, "I resolve to save more money." Start by something specific you wanna do with the money. Bobby, what's something you wanna do with your money?
- [Bobby] Take a vacation. - Attaboy. - To where?
- [Bobby] Toledo. - [Kevin] Now, measurable. How much money do you wanna save for your trip to Toledo?
- [Bobby] Mm. - [Kevin] Really splash out a big trip.
- [Bobby] I could really go for some paprikash and tacos.
- [Kevin] Not sponsored. Not sponsored. - [Maria] So good though.
- [Bobby] Let's say a thousand dollars. - [Kevin] Folks, that's a lot of paprikash. Now, achievable. What's your take home pay?
- [Bobby] I get about 1,500 bucks per paycheck. Twice a month.
- [Kevin] And your rent is how much? - [Bobby] $900 a month.
- [Kevin] So, how much do you think you could save per paycheck for this trip without cutting into rent, food, day-to-day expenses?
- [Bobby] I guess $50. - [Kevin] That feels achievable to me. Next, relevant. Do you eat out a lot?
- [Bobby] I don't know. Three times a week? It feels expensive. Should I cut it out entirely?
- [Kevin] Only if it feels relevant. You deserve to have a nice life. That's what money is for. If you need to reduce your spending to save up for the trip, do it. But only as much as you have to in order to meet your goal.
- [Bobby] So, maybe once or twice a week instead.
- [Kevin] That's my feeling. Otherwise, you're just robbing yourself now to pay yourself later. Think about why you're setting the goal and limit yourself to what you need to do to achieve it. Finally, timebound. Set a time by which you'll achieve this goal. You already said you wanted to save a thousand dollars and you'll set aside $50 from each paycheck.
So, 20 paychecks from now, you'll have saved a thousand bucks.
- [Bobby] Let's say 10 months from now. - [Kevin] That works for me if it works for you, Bobby. Now, say all of that back to me again. What's your smart goal, smart guy?
- [Bobby] In order to save for a trip to Toledo, I'm going to save $50 per paycheck for the next 10 months for a total of $1,000. Limiting my restaurant meals to twice a week during that time.
- [Kevin] Great work, Bobby. Now, for Round 2. Maria!
- [Maria] Oh my god. I'm on the show. - [Kevin] We'll get to your smart goals right after this lesson.
- [Presenter] Bobby got his goal, and now it's your turn. Think about something you wanna achieve with your money and make it SMART. Specific, measurable, achievable, relevant, and timebound. Give yourself the best chance to succeed because financial freedom starts with planning and it ends with paprikash or whatever's a priority for you.
Visit khanacademy.org/financialliteracy to learn more. (gentle lively music)
Video © Khan Academy, used under CC BY-NC-SA. Watch on Khan Academy. Puzzicle is not affiliated with Khan Academy.