SMART Goals Exercise

To be successful you need a combination of big audacious goals that fuel your passion, spark your imagination, and challenge your creativity; with very small daily steps and tasks that lead to eventual epic win. In the previous assignment you dreamed big about the kind of life you can create for yourself, the kind of person you want to become, and how you will make a difference in the lives of others. Now is the time to take one of those big, audacious goals (if your goals dont scare you, you are not dreaming big enough) and break it down into a series of very small, very realistic and attainable steps you can do that will move your closer and closer to your destination. This is done by breaking the big goal into smaller goals and then using the SMART acronym (Specific, Measurable, Attainable, Realistic, and Time Bound).

Select one of the items from your previous Be Do Have assignment and develop concrete series of steps to reach the goal. Make sure the actions are Specific, Measurable, Attainable, Realistic, and Time Bound. Be sure to include resources that will be needed (money, people, etc.) to accomplish the goal. Be sure to break the steps down,including enough detail so that you are clear on what the next action should be to accomplish the goal.

Create clear and tangible metrics so that you will be able to know when you have accomplished each task. For long-term goals create milestones to make sure you are on track when you are approximately 25%, 50%, 75%, and 100% complete.

Write out sample to-do list entries that you would use when planning your calendar to ensure goal completion.

Upload to BlackBoard by Monday, October 7^th. Assignment is worth 100 points.

Example:

I want to retire with the equivalent of $1,000,000 in todays money when I retire at the age of 67; which is 45 years from now.

To Do: (brainstorm everything that needs to be done at some point to reach the goal)

Calculate the amount needed in the retirement account to reach that goal when I retire.

Develop assumptions about investment rate of return, inflation, and wage rates over my working lifetime (next 45 years).

Develop a savings plan to reach goal using assumptions about investment rate of return, inflation, and wage rates.

Establish clear milestones to know if I am on target to meet this goal for at ages 30, 40, 50, 60 and 67.

Establish some contingency plans if I become disabled or die or lose my job and cant contribute funds to the retirement accounts or if the investment return and inflation estimates are wrong.

Open retirement accounts

Fund retirement accounts

Increase funding contributions with each raise received

Start contributions at 10% of income and gradually increase to 20% of income by age 55

Develop Excel spreadsheet to track progress

Each year on my birthday update spreadsheet

Educate myself on retirement account options

Assess my willingness to take risk and risk tolerance

Hire a financial planner when account balance is $300,000 or more

Organize the to-do list by grouping similar items together and create a few sub-goals that will lead to accomplishing the Big Audacious Goal. Make sure to use the SMART format for each of these smaller goals.

Beginning goal Educate myself by doing research and the calculations needed to determine how much I would need to save each year to have a target amount in my retirement accounts when I turn 67 years old 45 years from now. Complete this step in the next four weeks.

1. Develop assumptions about investment rate of return, inflation, and wage rates over my working lifetime (next 45 years).
2. Calculate the amount needed in the retirement account to reach that goal when I retire.
3. Assess my willingness to take risk and risk tolerance
4. Educate myself on retirement account options
5. Educate myself on investments that are consistent with my risk tolerance.
6. Develop a savings plan to reach goal using assumptions about investment rate of return, inflation, and wage rates.

Implementation goal Open the accounts and set up automatic funding and reinvesting. Create a spreadsheet to track progress. Establish milestones to track progress. Make contingency plans. Complete these items by December 1^st.

1. Open retirement accounts
2. Fund retirement accounts
3. Start contributions at 10% of income
4. Increase funding contributions with each raise received (save 1/3 of future pay increases by increasing contribution percentage, 3% pay increase = 1% increase in contribution rate until contribution rate is 20% of income)
5. Develop Excel spreadsheet to track and monitor progress
6. Establish clear milestones to know if I am on target to meet this goal for at ages 30, 40, 50, 60 and 67.
7. Establish some contingency plans if I become disabled or die or lose my job and cant contribute funds to the retirement accounts or if the investment return and inflation estimates are wrong.

Monitor and track progress. Develop a system to monitor and track progress towards the goal. Initiate contingency plans as needed. Further refine expectations by ensuring this is still aligned with my values and what I want to accomplish in life. Take action if account balance is below target at milestone dates. Complete each year on my birthday.

1. Hire a financial planner when account balance is $300,000 or more
2. Start contributions at 10% of income and gradually increase to 20% of income by age 55
3. Each year on my birthday update spreadsheet
4. Rebalance investment portfolio if needed after review on birthday

Completed Action Items:

Beginning goal:

1. 9% nominal rate of return based upon average of stock index rates of return over the last 50 years. 2.5% inflation rate based upon historical average of inflation over past 20 years. $40,000 estimated beginning annual salary assume salary will grow at 3% per year over working lifetime; with a promotion or job change every ten years that increases salary 10%.
2. To have the equivalent of $1,000,000 in todays money when I retire at age 67, which is 45 years from now, I will need to have $3,000,000 in the account. (N=45, I/Y = 5, PV=1,000,000, PMT = 0) FV= $3,037,903
3. Assess my willingness to take risk and risk tolerance, took risk tolerance assessment and found I have a high risk tolerance. I commit to not take funds out of my retirement accounts during a down market.
4. Educate myself on retirement account options. I need a combination of Roth and Traditional retirement accounts to best limit the amount of taxes I will have to pay over my lifetime. I will use Roth accounts early in my career when I have children at home and switch over to Traditional accounts when my 1^st child enters college. I will always invest the minimum amount needed to get the full employer match.
5. Educate myself on investments that are consistent with my risk tolerance. I will invest in small cap value (33% of portfolio in VBR) exchange traded funds, mid-cap exchange traded funds (33% of Portfolio in MDY), and large-cap exchange traded funds (33% of portfolio in SPY). I will start adding bonds to portfolio after I turn 50 years old.
6. Develop a savings plan to reach $3 million by the time I retire. N=45, I/Y=9, PV=0, Pmt=4,000 FV would equal $2.1 million. This gets me close and I know that I am going to contribute more as I get raises and promotions. I am concerned about starting out with a savings rate of 10%. I am not sure I will be able to manage that with the student loans, saving for a house, and getting a car. I know that many companies require at least a 3% or 6% employee contribution to get the full match and I have committed to always save enough to get the full employer match. I will need to do some Excel spreadsheet models to see what is realistic.

Completed Beginning Goal on September 1 (2 weeks after goal established)

Completed Action Items for Implementation Goal:

1. Open retirement accounts completed paperwork with HR to start retirement account contributions at 6% of pay, and they will match with 3% for a total of 9%. Next step, open Roth IRA account with Vanguard and send them a $400 check to open the account
2. Fund retirement accounts. Will send the check to Vanguard in March after I receive tax refund.
3. Start contributions at 10% of income modified goal slightly to 6% going into company 401(k) account, 3% company match, 1% going to Roth IRA account for a total of 10%.
4. Increase funding contributions with each raise received (save 1/3 of future pay increases by increasing contribution percentage, 3% pay increase = 1% increase in contribution rate until contribution rate is 20% of income). Employer doesnt have an automatic increase funding option, so I will need to remember to do this before each pay raise.
5. Develop Excel spreadsheet to track and monitor progress. Spreadsheet developed on Oct. 1^st. See attached spreadsheet retirement projections.
6. Establish clear milestones to know if I am on target to meet this goal. Age 30 have 1- time annual income saved. Have received a promotion and am currently saving 20% of income by age 33 and can stop increasing saving amount with each raise. Age 40 have $250k saved. Age 45 $500k saved. 1^st million by age 51. $2 million by age 58. $3 million goal reached by age 63.

Next Steps:

1. Establish some contingency plans if I become disabled or die or lose my job and cant contribute funds to the retirement accounts or if the investment return and inflation estimates are wrong. This needs to be done by December 1^st to accomplish the Implementation goal.
2. Work on Monitor Goal each year with annual reviews on my birthday to see progress towards overall goal. Birthday updates show that I am currently on track to meet the goal.

Resources if you want to learn more about SMART goals: Smarter, Better, Faster by Charles Duhigg

Save More Tomorrow program by Richard Thaler

Super Better by Jane McGonigal including Super Better app

Franklin Covey Planning system and the 7 Habits of Highly Effective People by Steven Covey

See You at the Top by Zig Ziglar