As we begin another year, (in fact another decade), the topic of goals is front and center. Start of the year goals are notorious for lack of follow-through. Fitness goals and financial goals usually top the list. Without a plan to place these goals into the fabric of our lives nothing happens and before you know it, the middle of the year has arrived and nothing has changed.
Oftentimes our goals are akin to the question we ask our children or grandchildren: “what do you want to be when you grow up?”
Don’t Make Empty Promises
Without a concrete plan, however, goals can quickly become nothing more than empty promises. The whole point of financial planning is to connect and align goals with a systematic way to accomplish these aims.
Progress toward specific goals is an important part of our ongoing work with clients. The focus during our review meetings is much more on behavior than investment performance because that is, by far, the most crucial variable and within our control. If you can’t stay invested in ‘scary markets’ even the best portfolio allocation won’t serve you well.
Break the Prediction Addiction
At the start of the year predictions and prognostications abound about what might (and might not) happen over the coming months. From a financial perspective these are dangerous because sometimes investors want to follow these predictions in hope of gaining some type of advantage. In reality, there is essentially zero evidence that these “get in or get out” predictions work.
Beyond the ‘prediction addiction’, having a plan to achieve your most important goals starts with you; the goals must be truly personal and truly yours. They can’t be your friend’s goals…they have to be wholly owned by you. It’s nearly impossible to generate the needed follow-through for goals that aren’t meaningful to you and supportive of your aspirations.
Dreaming versus Doing
There’s a big difference between dreaming and doing. How do you narrow the space between the two?
Well, one way to close the dreaming/doing gap is to pay for follow through. This might be called “The Peloton Phenomenon” owing to the incredibly high persistence rate of many Peloton bike owners. Because Peloton is relatively expensive, the follow through rate is high. Of course, simply paying doesn’t guarantee action but it’s a start.
Behavioral economics uses the term intertemporal choice to describe the impact of decisions that impact different time frames. We wish that we had saved more in the past; we fully intended to save; we didn’t actually save; now we regret our choice. Our decision not to save during one time period directly impacts another time years into the future.
Unless you have a plan to save for your future, chances are it won’t happen. Having the goal alone won’t be enough. You need accountability to create good choices. Start there. Ready for a real conversation?