As the wise author, Napoleon Hill once said, “A dream is a goal with a deadline.” The difference between the two is that a goal has a time limit; a date in which it needs to be accomplished. Here at Digs, we want to help make your dream of owning a home come true. That’s why we encourage you to really think about what it is you want to achieve. How much money do you need to save for your future home? When do you need to save it by? We’re going to show you a little goal-setting tactic you can use when creating a budget to buy your first house. Let’s put a deadline on that dream of becoming a homeowner!

The Problem with Vague Goals


Research shows that 92% of people do NOT achieve their goals. That means that only 8% actually reach the goals they set. Pretty sad… right? What if I told you that this small 8% of the population did NOT achieve their goals because they’re part of some hyper-intelligent superhuman breed. Well… a few of them might be, but regardless, you too can set a goal and accomplish it! All you need is a few good habits and a little self-discipline!

The main reason that 92% of the population do not reach their goals is that they lack specificity. Their goals are vague and unclear. How many times have you envisioned the perfect New Years Resolution: Lose 20 lbs, get in shape, save money, etc. You enter the new year thinking, “This is it, the year I will actually ____________.” 

Well, what happened to that gym membership you promised yourself you’d actually use? Remember when you were going to start that Keto diet to shave off a few pounds? How about that time when you said you were going to cut back on eating out so you can finally start saving for your first home

The point is that when goals are not clearly outlined with tangible steps towards achieving them, they can be REALLY difficult to accomplish. 

What Are SMART Goals?


You may be thinking, “How do I clearly define my goals so I can buy a house?” Introducing SMART goals, a practical way to set and accomplish your goals. SMART is an acronym used for specific, measurable, achievable, relevant, and timely goals. 

Specific

To start, goals that are specific distinctly indicate what you are trying to achieve, why you want to reach this goal and who all is involved. Specific goals give you a clearer focus of what needs to be done to make this goal a reality.

Measurable

Measurable goals allow you to evaluate your progress along the way. Setting small benchmarks help you to see exactly what you’ve done so far and what else you still need to accomplish. Measurable goals can also serve as encouragement and inspiration. Seeing how far you’ve come can motivate you towards the finish line. 

Achievable

Your goal needs to be possible to attain and within reach. Let’s say you just graduated from college with a degree in marketing. You probably wouldn’t set a goal to be the first human on Mars by 2020 if you have no background in science or engineering. In all reality, it’s just not practical or possible to achieve given your experience and the timeframe. (Unless you’re one of those hyper-intelligent superhumans we talked about earlier.) Your goals should challenge you and make you work to succeed, but they should not be impossible and unlikely to achieve.

Relevant

Your goal should be consistent with other goals that you have. Perhaps you just got married and have plans to start a family within the next couple of years. Your goal to buy a home is relevant and consistent with your goal to have children. 

Timely

By setting a timeframe on your goals, you are able to visualize what steps you need to take to reach it. It allows you to figure out what you need to do now to ensure that your goal is completed by your deadline. For example, say you and your partner want to be homeowners in 3 years.  By putting a time limit on this goal, you and your spouse might identify areas in your current lifestyle where you could start saving for a downpayment

How SMART Goals Can Help You Save


So now that you understand what SMART goals are, let’s walk through a practical example that you can apply towards saving for your first home

Here is a plain jane, ordinary goal: Buy a house next year. 

Now here is that same goal only refurbished, using the SMART principle: Save $40,000 (20% down payment) for a $200k house in the suburbs by 2022. 

Do you see how easy it is for that first example to slip into the dark abyss of unachieved goals? It’s so broad, it almost seems daunting. (Probably the same reason why your New Years resolution to “get fit” got kicked to the curb after the first month.) It’s hard to stay focused on a goal when you have no idea where to start or what to do after you start.

However, the second goal explains the price of the home you want to buy, where you want to buy, when you want to buy, and how much you need to save in order to buy. It’s specific in the sense that it describes in detail what you want to accomplish. It’s measurable because you can track how much you are saving each month. It may be challenging, but with some self-discipline it sure is achievable. Perhaps you’re in a new season of life that’s relevant to buying your first home. Lastly, this goal is timely, with a deadline of 3  years to plan and save. 

Readjusting Your Budget for Your Goal

By setting a goal like the SMART example used above, you can recreate your budget to align with that goal. If you know that you have 3 years to save $40,000 (for your 20% downpayment) you can readjust your budget accordingly. 

One easy rule to follow when it comes to budgeting is called the 50/30/20 rule. By knowing your after-tax income you can figure out what percentage of that income should go towards what each month. 

50% – Needs

50% of your income goes to necessities. Necessities are things that you need; food, utilities, transportation, insurance, housing, etc. 

What if you tally up all of your needs and see that it surpassed 50% of your after-tax income? Easy! Just cut back on the things that you want.

30% – Wants

30% of your after-tax income should go towards your wants. Your wants are things that you desire but are not dire for your survival. Eating out, entertainment and traveling may be things that you want, but you don’t absolutely NEED them. 

It’s important to note that wants may range from person-to-person. Everyone is different and something that you want may be a need for someone else. For example, that gym membership that you want may be a need for someone else. 

20% – Savings

That last 20% of your after-tax income should go towards either your savings or towards repaying your current debt. This percentage may vary depending on your time frame to save for your house, but a general rule of thumb is to save 20% each month. Using the deadline you set with your SMART goal you can calculate how much you should be saving monthly. 

Takeaway


It’s easy to get discouraged when your goal seems too large and vague to accomplish. A SMART goal, however, helps you devise a plan of action towards achieving it. They help you stay focused during the seemingly overwhelming process of buying a home. Once you have your SMART goal written out, you can use the 50/30/20 rule to coordinate your budget and help you save for a house. 

 

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