“One can choose to go back toward safety or forward toward growth. Growth must be chosen again and again; fear must be overcome again and again.”
― Abraham Maslow
This quote sums up in two brief sentences what I view to be the chief challenge of personal finance: choosing positive personal finance progress when we desire pleasure and the safety of our old routines.
You take a step forward on your financial journey when you make an active choice to spend less money and to invest that money in your future. This step forward causes your net worth to grow and brings you closer to your goals, whatever they may be.
You take steps forward in other journeys in life, too. You take a step forward in your weight loss journey when you choose to eat a healthy meal. You take a step forward in your exercise journey when you choose to get up early and go for a jog. You take a step forward in your personal growth journey when you turn off the television and read a challenging book while taking down notes on your thoughts on it as you go. You get the idea.
You take a step backward on your financial journey when you make an active choice to spend more money and enjoy whatever short-term pleasure comes from that money. This step backward causes your net worth to shrink and takes you further away from your long term goals, whatever they may be.
You take steps backward in other life journeys as well. You take a step backward in your weight loss journey when you choose to eat a really unhealthy meal. You take a step backward in your exercise journey when you turn off your alarm clock and roll over instead of getting up to exercise. You take a step backward in your personal growth journey when you watch a reality television show and don’t spend that time reading something personally challenging. Again, you get the idea.
Every single day is loaded with opportunities to take steps forward, as well as many opportunities to take steps backward. A few examples:
You’re hungry. You could look in the fridge and eat some leftovers, which would be a step forward – it’s basically a free meal. Alternately, you could order delivery or go out to eat, which would be a step backward – it’s an expensive meal. (You could also make something simple at home, which amounts to no step at all.)
You’re visiting a website and there’s something really cool for sale there. You’re tempted by it. Your mouse hovers over the “Buy” button… and you click it. That’s a step backward. (Not clicking is no step at all – you’re not “saving” money by not buying something.)
You’re at the grocery store, about to put a name brand dishwashing detergent in your cart. Instead, you put it back and decide to give the less expensive store brand a shot. That’s a small step forward.
But where do all of these steps lead you? Let’s take a look.
Your Big Goal in the Distance
Virtually everyone has some sort of big goals in life, even if they don’t view them as such. Some people see them as mere dreams or they might just see them as positive assumptions about their future.
So, here, I’m using “big goal” in a very broad sense of the term. It’s just a hope or an expectation of a good thing in your future, one that you probably won’t reach without at least a little bit of effort.
Using myself as an example, my own “big goal” in terms of personal finance is financial independence, which I take to mean the ability to have our living expenses covered by the income from our investments. I also would like to move to a different house in a more rural setting, mostly because our current house doesn’t allow several things we’d like to do.
A few years ago, my “big goal” was complete debt freedom with home ownership – yes, with no mortgage. I set that as a goal in 2006 and achieved it at the very end of 2011.
For me, big goals work much better if I incorporate two key ingredients into the mix.
First, I visualize that goal with as much detail as possible, and I revisit that evaluation all the time. Doing this provides a deep innate motivation to work toward that goal. It becomes easier to take the difficult steps to work toward that goal, whatever it might be.
Second, I break it down into smaller pieces. Even with a lot of visualization, a goal can still seem really big, more than I can handle. My solution is to simply break it down into smaller and smaller steps until I know I can handle that first step, then that overall motivation pushes me forward.
Your Starting Point
If your goal is your destination, you must have a starting point somewhere.
Perhaps your starting point is where you find yourself today. Everyone starts somewhere with a goal, after all. For others, their starting point describes where they were at some point in the past.
My own starting point came in April 2006 when I realized that I was putting myself and, perhaps more importantly, my infant son in a horrible financial situation due to my own silly short-term choices. I wrote about this experience many years ago, but the words I wrote there are still true. It was my financial low point and the clear starting point for my journey.
Generally, people dread returning to that starting point, but at the same time, there are some comforts to heading back in that direction. Often, that starting point was originally reached due to some sort of overindulgence – overindulgence in spending, in food, in laziness – and there’s some aspect of that indulgence that appeals to you. You spent a lot of money because you have a lot of interests and desires. You ate too much because you loved food and it brought you comfort and pleasure.
Thus, walking away from that is a serious challenge.
You – Somewhere in the Middle
So, if you’re on this journey between your starting point and your big goal, you’re somewhere in the middle between the two. You’ve taken a lot of steps (or at least a few steps) away from that starting point, but you’ve got a lot of steps to go in order to reach your goal.
I find myself somewhere in the middle as well. My starting point feels practically lost in the mists of the past, but my destination doesn’t feel incredibly close, either. They both feel very far away.
To me, this is the most challenging part of the journey. You don’t have the motivation to sprint away from your starting point, as you don’t feel pushed right up to the edge any more. You also don’t have that motivation to sprint toward your goal, as that’s not particularly close either. The steps forward are challenging and the steps backward are often comforting and tempting.
Other than those sprints right at the start and right at the end, I view progress toward a big goal as being something of a “random walk.”
A Random Walk Down Life’s Street
What do I mean by a “random walk”? It’s an idea I learned about from Burton Malkiel’s amazing investment book A Random Walk Down Wall Street.
In that book, Malkiel proposes a very interesting model for investing in the stock market. He describes it as a “random walk,” meaning that on some days, individual stocks will take a step or two upward and, on other days, they will will take a step or two downward. It is almost impossible to predict these steps other than in the very long term and as a large collective group (the entire stock market), even then, only in the most general way (the market has trended upward forever as human productivity has grown).
(If you’re curious, his investing advice in a very simple nutshell is to buy a lot of different investments and hold onto them for a long time.)
That’s great, but what does that have to do with a journey toward a goal?
Remember, at the beginning, we started off with a discussion of goals as a collection of steps. We sometimes choose to take steps forward that move us toward our goal, and we also sometimes choose to take steps backward that move us back toward our starting point.
The thing is, in a given day, we take a lot of steps. Some of them are forward steps and some of them are backward steps. At the end of the day, our progress toward our goal – or our regression back toward where we started – is made up of the sum of our steps. If we made more steps forward than steps backward, we’re a little closer to our goal. If we made more steps backward than forward, we’re further from our goal and closer to our starting point.
Let’s take a closer look at these forward and backward steps.
A Step Backward
A backward step is just what was described above. It’s the easy path. It’s often the comforting path, built out of familiar and at least somewhat enjoyable routines you’ve established in the past. It’s usually the path of least resistance in your life, meaning it requires the least effort of all of your options in a given moment.
Every time you choose to take a backward step, you move a little bit further from your goal. Often, we justify that backward step by focusing on how little it is. “This $20 expense won’t really matter – it’s just $20 compared to the huge wealth I’m trying to accumulate.” “This pizza won’t really matter – it’s just a few calories compared to the mountain of calories I’m trying to lose.” “Sleeping in today won’t really matter – it’s just twenty minutes of jogging compared to a lifetime of physical fitness.”
Those statements are nothing more than justifications for backwards steps.
Another challenge when it comes to backward steps is that sometimes life practically forces you into those steps. The path of least resistance becomes so much less resistant than everything else that you have to take it. You’re famished while traveling and the only food option is really unhealthy. You were up until three in the morning with a sick child and your alarm is telling you to jog at 6 AM. You just went through an incredibly stressful and long day at work and all you want to do is vegetate in front of a television show for half an hour before bed because your brain is utterly frazzled.
The thing is, every time you take a backward step, you essentially add another forward step that you have to take toward your goal. You have to take an active step forward just to get back to where you already were.
Sometimes, people get caught up in that fact. They take a few backward steps, feel as though they’ll never reach their goal or even get back to where they were, and they just give up. They turn around and return to all of their old patterns, marching right back to their starting point.
The thing to always keep in mind is that a backward step is just one step in a long and somewhat random journey toward your goal. There has never been a big goal in the history of mankind that didn’t involve some backward steps along the way.
A Step Forward
On the other side of that is the step forward. Steps forward are rarely the easiest option in a given moment. It usually means additional effort, such as a less “comforting” meal, a requirement to get out of a warm and comfortable bed earlier than you have to, or a purchase of a less-desirable item (on the surface, anyway).
Steps forward are hard, whereas steps backward are usually easy. Steps forward are those little tests that life throws at you every single day. They’re not supposed to be easy – if they were, everyone on earth would have the big goal that you’re trying to achieve.
For me, forward steps often come in “streaks.” I’ll have periods where I’m able to knock off a bunch of forward steps in a row, often without a backward step to be seen, and I feel really good about it. I’m firing on all cylinders toward that goal.
But those streaks don’t happen every day.
The Real Goal – More Steps Forward Than Backward
Most days, my journey toward my goals is filled with a mix of forward steps and backward steps.
I’ll stick tightly to my grocery list at the store and buy several generic items, but then I’ll buy something on the internet that I shouldn’t.
I’ll put aside some money (automatically) into our investments, and then our family will go out to eat when we really didn’t need to.
I’ll eat a small bowl of steel cut oatmeal for breakfast, and then I’ll eat three slices of reheated pizza for lunch.
I’ll go on a long walk in the morning, but then skip out on doing some dynamic resistance exercise in the afternoon.
I’ll spend a bit of time reading something mentally challenging, but then I’ll go play a mindless computer game or watch a mindless television show.
I take a step forward… and then I undo it with a step backward.
This pairing of steps forward with steps backward used to frustrate me. At the end of a day, I’d look at the effort I put into positive steps, then lament that it earned me “nothing” because I took negative steps along with it. I ate a healthy breakfast… but it was all undone by an unhealthy lunch. I was smart about the groceries… but then I was dumb with my online order.
However, that doesn’t expose the real truth of it. If you keep pairing your biggest success for the day with your dumbest mistake, you’ll never feel successful.
A much better approach is to look at your day as a whole. Try not to just think of your biggest step forward or your biggest mistake, but all of the little moves you made, both good and bad.
You parked in the free parking area and walked a bit further to your destination. You took the stairs at work instead of riding the elevator. You ate too much chips and salsa at lunch. You drank water instead of having a soda.
Little steps, and lots of them.
The trick is that progress toward your big goal happens every day in which you take more steps forward than steps backward. Success isn’t judged by the big step forward you took today or the big step backward, either. It’s by the sum of the choices you make throughout the day.
Most of those little choices are small ones that you’ll forget. I’ll forget that I chose to drink water with lunch instead of soda. I’ll forget that I parked in the free parking spot. I’ll forget that I bought bulk steel cut oats instead of the packaged brand.
But what I will notice is what life is like when those positive steps outweigh the negative ones.
My checking account balance creeps upward. My weight creeps downward. I feel more energetic. I don’t get out of breath as easily when playing soccer with my children.
Those things don’t happen because of the big positive steps (though they help), and they’re not undone by the big negative steps (though they don’t help).
Those things happen because on the whole, the sum of my positive steps, both big and small, is more than the sum of my negative steps, both big and small.
So what can you really do to make this all click in your life?
Whenever you’re faced with a little choice, one that moves you just a little bit toward your goal, take the step forward. The resistance against it is usually small. It’s often something like ordering water with your meal or taking the stairs at work or sitting down in a comfortable chair with the book you’re reading.
At the same time, don’t stress out on the steps backward. They’re going to happen sometimes. If you worry about perfection, your goal will fall apart.
Your focus instead should be on simply taking more steps forward than steps backward today. Today is really the only day that matters, because today is the only day where you have control over the decisions you make. You can’t control yesterday, and you can’t control tomorrow. You can only control today, and thus it’s the decisions you make today that actually matter.
It’s a random walk through life, but you have the power to decide the overall direction, and you have that power every single day.
What will your walk be like today? It’s entirely up to you.