Wipe Out Credit Card Debt by Setting SMART Goals

Shatoria Smith was tired of the $5,000 in credit card debt she felt was blocking her from reaching her financial goals. She couldn’t see an easy path to being debt-free, so she drew herself a map by adapting a goal-setting framework she’d first heard about in a college business class: the SMART method.

“The SMART goal framework helps you dig deep and devise a plan of how to actually accomplish it,” says Smith, who lives in Florida and writes about debt, budgeting and personal finance on her blog, Coin Countin Mama. “I was very motivated.”

SMART was created by management consultant George T. Doran in the early 1980s as a tool for helping businesses set performance objectives. Over the years, it has been adapted for goal-setting situations beyond the workplace. Smith applied it to her finances in late 2014.

What it means to be SMART

As originally laid out by Doran, the SMART acronym calls for goals to be specific, measurable, assignable, realistic and time-related. Here’s how to apply it to credit card debt:

• Specific: Define exactly what you want to accomplish and how you will do it. Smith set a different strategy for each of her three credit cards. For one of them, she wrote that she wanted to pay off $2,450 within a year so she could free up money to pay student loans. Her budget included $300 every month toward that goal.

• Measurable: Track your progress. You could do so with pen and paper, a spreadsheet, an app or whatever works for you. Smith used an app with a goal-tracking feature.

• Assignable: Make clear where responsibility lies at each step. This is especially relevant if you’re paying down debt with a partner. (Some modern versions of SMART replace “assignable” with “achievable,” meaning the goal should be realistic.)

• Realistic: Set goals that are achievable with the resources available. You can dream big, but the smaller steps that lead up to that dream should be within reach. At this stage, stop using credit cards while paying down debt to get results. (Some versions replace “realistic” with “relevant,” meaning the goal is worth pursuing.)

• Time-related: Set a deadline. The timeline should be based on what you can do, not just your desires. Smith says she crunched the numbers to establish the deadline that she met toward the end of 2015.

Confront your budget

Getting an accurate picture of your finances, such as overall expenses and the money available to pay down debt, is the key to setting SMART goals, says Adam Hagerman, a Maryland-based certified financial planner and educator who uses the method to help clients meet financial goals.

“What people think they spend is usually way different than what they actually do,” Hagerman says. “That’s why it’s important to take a step back and say, ‘How have I spent my money over the last 30 days?’”

Once you get that accurate picture, he says, you may need to revise your original goals.

You can also consider get-out-of-debt strategies if you can’t keep up with your debt payments. For instance, you might consider transferring a balance to a new credit card with a 0% introductory offer, consolidating debt to a personal loan or seeing if you qualify for a credit card hardship program.

Unpack your motivation

No matter how well-defined your goal, it’s only achievable if you’re motivated enough to put in the work. A 2019 study in the Journal of Financial Planning found that establishing an emotional connection to an item of sentimental value could motivate people to save more money. The same idea could apply to credit card debt, according to a contributor to the study, Bradley Klontz, a financial psychologist and associate professor at the Creighton University Heider College of Business.

For example, to eliminate debt to fund your kids’ college, a photograph of your kids in your wallet or on a mobile device could guard against goal-shattering purchases.

“It really helps anchor our emotions and our values to what essentially requires us to override our natural wiring,” Klontz says. “The way to override that is to actually have something that is more important, so then the sacrifice becomes easy to make.”

You can also name your goal. Try something like, “$5,000 to Debt-Free and Stress-Free,” and change the number as the debt shrinks. It’s harder to steal from a goal when its name has an emotional attachment, he says.