We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free – so that you can make financial decisions with confidence. The offers that appear on this site are from companies from which TheSimpleDollar.com receives compensation. This compensation may impact how and where products appear on this site including, for example, the order in which they appear. The Simple Dollar does not include all card/financial services companies or all card/financial services offers available in the marketplace. The Simple Dollar has partnerships with issuers including, but not limited to, American Express, Capital One, Chase & Discover. View our full advertiser disclosure to learn more.
Practical Goal Setting for Finance and Personal Success
Marcus writes in:
I was really intrigued by your goal setting process. Could you walk me through that in more detail?
Quite honestly, I wasn’t sure what Marcus was referring to until he pointed me at this little section in my article early this week about the battle against scarcity:
In a very practical way, the most useful tool I’ve ever found for figuring out what I really valued and turning them into practical goals is the “three morning pages” journaling routine, where I sit down with a notebook and strive to fill three pages of it with whatever comes into my brain. This often turns into an exploration of what I truly care about and what I can do to manifest that in my life, which sets the stage for practical goal setting with goals that are really meaningful to me. When I have goals that are truly meaningful to me, I am strongly motivated to achieve them and I tend to hold onto the results of successful thirty day challenges if they help me move toward that goal in a real way.
I’ve written about goals before on The Simple Dollar – this article about SMART goals in personal finance is probably the best one – but all of those articles start off with the assumption that you already have some sort of goal in mind and you’re just honing it into something that will be successful.
When you step back and think about it, that’s really the fourth or fifth step in the process. A great goal doesn’t just spring out of nowhere. There’s actually a chain of things that go on before you even have any semblance of a goal, and it’s usually because of stumbles in that process that people wind up with goals that don’t really match up with what they want out of life.
So, let’s walk through all of this from the start, step by step.
Step 0 – Live Life
A good personal goal comes from the way you live your life, nothing more, nothing less. This is the core of every good personal goal – it emerges from the patterns of your daily life.
This might seem like an obvious beginning, but many people come into goal setting without having done this. They hear about some idea pitched somewhere that appeals to them in some way and decide that this new thing they just learned about is their goal. They dive into it and then it fails, as it inevitably will.
That’s because good goals are rooted in the reality of your life and your experience and who you are as a person, and that’s different from everyone else on Earth. You can’t just wholesale take on a goal that someone else came up with because it sounds good at the moment, because it doesn’t come from you.
Live your life. Don’t pay any attention to what others say and what goals they think you should have for yourself. Live life fully, but with your eyes wide open.
That brings us to the true first step…
Step 1 – When You Notice Something You’re Not Happy With, Don’t Ignore It
Eventually, we all notice something we’re not happy with in our lives. For some, this comes really easy, because we’re immensely dissatisfied with some part of our life. For others, it can be harder, as a generally content person might find it hard to find some real form of discontentment in their life.
Although I’m generally content with my life, I can name several things I’m unhappy with. I am unhappy with my weight (though I’m in a better place that I used to be). I am unhappy with my flexibility. I am unhappy with the state of organization in my office. I am unhappy with how my free time is divided up.
At this point, it’s simply noticing that there’s a problem of some kind in my life. I don’t have any sense of a goal at all, just that there’s something that’s not where I want it to be.
In my own financial journey, I could see this starting to happen about a year before my own financial meltdown. I wrote about it in my journal about nine months before things really moved into crisis mode. Right there, I was already noticing the problem, but the issue then was that I didn’t move on to the next step until things got significantly worse.
In general, once you’ve noticed something you’re unhappy with, the next step is to give it some serious thought.
Step 2 – Think Through the Problem
Once you have a sense that there is something in your life that you’re genuinely unhappy with in a lasting way, you still shouldn’t jump straight to a goal.
A goal at this point would be just a Band-Aid on top of a serious wound. It’s a quick “fix” but it doesn’t really fix the problem in any meaningful and lasting way. The Band-Aid is likely to fall off and not help at all or even make things worse.
Instead, the best approach here is to give yourself some time to think through the problem. I use three key tools for this.
Step 2a – Spare Thoughts
Whenever I have some spare moments in my life, like when I’m driving somewhere or I’m waiting in a line or something like that, I consciously turn my thoughts to what’s going on in my life. I think about things I’ve noticed that I’m unhappy with and I toss them around a little. (I also often visualize upcoming situations and try to come up with a great way to handle them, or replay recent situations and try to figure out how to handle them better.) In general, I’ve tuned my spare thoughts to be self-reflective in a way that I think will make me into a better all around person.
The approach I often like to use with this is what I call the “five whys.” I think about something I’m unhappy with in my life. Why am I unhappy with that aspect of my life? I spell out that reason. Well, why does that make me unhappy? And I answer that. I do this until I’ve asked “why” five times, and usually the final answer is something that’s got me a bit emotionally agitated, but it’s usually something that’s really close to the root of the problem.
This was a thought process running through my head quite a lot during my financial low point. I felt very on edge about everything, and it was through asking lots of “whys” that I was able to burrow down to the core problem, which was that I was failing my family and my own future.
Step 2b – Homework
Another key aspect of thinking through a problem is to study the problem in detail, discovering what others have done to successfully deal with that issue in their life and what researchers have found about good ways of addressing the problem.
For me, this usually involves checking out many books from the library and reading most of them and browsing the rest. When I’m trying to bear down on a specific problem in my life, I become a voracious reader.
What I find, though, is that the more I read and the more I think about a problem, I often find myself changing directions a little bit because I begin to discover that the actual problem that needs solving isn’t exactly what I initially thought that it was.
Step 2c – Freeform Journaling, or “Three Morning Pages”
A strategy I’ve been using in the last year or two that works incredibly well for piecing through life’s problems (and other intellectual problems, like figuring out where I stand on a political issue or working through a new idea) is called “three morning pages,” which I learned from the writings of Julia Cameron.
“Three morning pages” is a really simple idea. In the morning, just set aside an hour or so, open up a notebook, grab a pen, and start writing whatever comes into your mind. What happens is that the focus and time it takes to write down one thought often leads to the next thought that sensibly follows it, and so on, which usually ends up leading to greater understanding and a good conclusion. It’s kind of like the “five whys” that I do in my head, but more freeform.
At first, I was really skeptical of devoting this much time to a journaling practice in the morning, but I came to realize that this was an incredibly effective way of “sharpening the axe.” The process almost always left me feeling clearheaded and refreshed, and it almost always helped me integrate the things I was thinking about and the things I was learning into some really powerful conclusions.
What I’ve found is that this “three morning pages” practice often ends up being part of a feedback loop. I’ll end up thinking about some of the conclusions I’ve drawn and then that ends up fueling more reading, which ends up fueling more morning pages. Eventually, I end up reaching a really firm conclusion about what the problem actually is, but it usually takes some cycles of reflecting, reading, and journaling.
I view this as moving from just slapping on a Band-Aid to actually evaluating the disease and figuring out what’s wrong.
A Note About Step 2 – Recognize the Internal Value
Most people care in a relatively shallow way about a lot of things, but they really only care about a few things (beyond their basic needs) enough to really take action on them. Think about how people profess how much they care about a political issue, for example, and then can scarcely “find the time” to even vote, let alone do campaign work or run for a local position.
Here’s a key truth for you: if a goal is not intrinsically tied to one of those things you truly care about on a deep level, it’s probably not going to succeed.
I was aware of my personal finance problem for most of a year, but it took the connection of that problem to something I cared enough about for me to take action – namely, my child’s future and my self-identity as a good father. If not for that, I likely would have kept pedaling in place, frustrated about my finances but not really changing anything about my behavior.
Why is it hard? Usually, we adopt behaviors we don’t like in some ways because we do like them in other ways, and when the habit is established, it’s very hard to break. We have to value something different more than the path we’re currently on plus the effort needed to change it. That’s not easy, especially when we already like aspects of the path we’re on.
That’s not easy. We all care about a lot of things, but very few things meet that threshold, and without that threshold, it’s hard to set a goal that requires major changes in life.
You have to recognize that achieving a goal means giving up something in your life right now. Achieving a goal means you’re devoting some resource in your life to that goal, whether it’s money, time, energy, or something else. That resource is currently being used for something else, probably something you value at least a little.
Part of the reason for carefully thinking about a goal and working through it is to uncover whether or not you really care about something enough to actually make change in your life or whether it’s wishful thinking. For most of us, that means it has to tap into something truly more important and urgent than the reasons why we already spend our time, money, and energy.
Simply adopting a goal isn’t enough. You have to know why you’re adopting that goal, and that’s why the homework and the journaling and the thinking is so important. You have to understand the why.
Step 3 – Stating the Basic Goal
At some point, a switch will flip and it will begin to feel more “right” to actually start making a change in your life than to let things be as they are. That’s when you’re ready to actually develop your goal, and the first step is stating that goal.
This might seem obvious, too, but it’s actually harder than you might think. Most goals that people set for themselves aren’t all that useful – they’re really strong notions that pack a powerful personal punch, but they don’t really lead to any sort of action.
For example, you might want to “get your finances in order,” but what does that even mean?
Start by thinking about what you want to be different in your life as compared to how things are right now. That should be the core of your very basic goal. “I am currently X. I want to be Y.”
For example, you might say “I am currently in debt. I want to be free from debt.”
Or you might say “I am currently overweight. I want to have a normal weight.”
Or you might say “I am currently a bad father. I want to be a good father.”
A good goal starts by distinguishing where you’re at from where you want to be. That way, the change that you need to make becomes clear and then you can start revising that goal into something meaningful.
Step 4 – Making the Goal SMART
A good goal is one that sets you up for something clear that you can do each day to move toward the goal. One way to massage your goal in this fashion is to use the SMART rubric. SMART is an acronym for five elements that a good goal should have.
Spacific means that it is extremely clear what it is that you want to do. Simply stating your goal should make it abundantly clear what it is that you want to accomplish.
Your goal should answer five questions – what? why? where? who? which? Sometimes, some of these questions are assumed, but you should make them either as clear as possible or else rely on them as a very obvious assumption (“where” is often assumed, for example).
A goal of “I want to get my finances in order” can be made specific by “I want to eliminate my family’s debt load and set up an automatic plan to save enough to comfortably retire.”
Measurable means that the line between success and failure is immediately clear and usually represented by a number.
For example, with the finance goal above, the “measurable” is already there for part of it – a total debt of zero. The other part probably depends on some calculations – maybe you need to be automatically putting aside 15% of your salary for retirement to say you’ve succeeded. That’s clearly measurable.
Achievable means that it’s a goal you can actually pull off if you work hard at it. It doesn’t rely on things happening that are outside the possibility of your current life.
Debt repayment is an achievable goal for most people. On the other hand, becoming a billionaire isn’t an achievable goal for most people because it requires things that are outside what they have and what can easily be acquired. All the effort in the world won’t make you a billionaire unless you add a great idea, a bunch of skills, and a ton of luck.
Realistic means that it’s actually achievable within the constraints of your life. Everyone’s life is different – something might be achievable for a lot of people, but it’s not realistic for some of them.
A perfect example of this is a goal that is something you could pull off if you didn’t have kids or a husband or a job, but it’s essentially impossible to do with those things gobbling down resources (time, energy, money) in your life.
A good way to check whether a goal is realistic is to think about the people in your life that will be affected by your goal. Will they be able to “flex” enough to make room for the changes needed for you to achieve your goal? What will that require out of them?
Time-limited means that you’re setting a deadline for yourself to achieve that goal, which gives you some constant pressure to work on it. This time limit should be realistic, of course, and within what’s actually achievable (though pushing the edge of what you think you can handle can be a good motivator).
For example, someone who’s losing weight might shoot to lose 1.5 pounds a week for a year, which adds up to a 75 pound weight loss in a year.
When a SMART goal comes together, I find it useful to start constructing a plan almost immediately, and that plan comes from a series of questions. I ask what I can do in a series of timeframes to complete this goal or move forward on it.
What can I do in the next 12 months to achieve this goal?
What can I do before the end of the year to achieve this goal?
What can I do in the next three months to achieve this goal?
What can I do this month to achieve this goal?
What can I do this week to achieve this goal?
What can I do this weekend to achieve this goal?
What can I do today to achieve this goal?
I ask those questions over and over again, almost on a daily basis, which moves us into step five.
Step 5 – From Goals to To-Dos and Reminders
Almost all of the goals I set for myself are made up of some combination of two elements. They consist of to-dos, which are very specific actions that I need to take, and reminders, which are changes in behavior that I need to maintain in my life.
For example, if my goal was to read 20 books on a topic in a year and take notes on them, I would add an item to my to-do list, a repeating to-do that would tell me to read for an hour each day with my notebook and pen beside me. I constantly look at my to-do list throughout a given day and strive to empty it out most days. Having a to-do list that I don’t have to actively think about during the day is a great thing. (Unsurprisingly, my “three morning pages” often clarifies today’s to-do list, adding things and removing others.)
Other goals don’t work quite as well with specific to-dos. For those, I use reminders – more specifically, I use the “triggers” technique that I learned from Marshall Goldsmith’s book of the same name. Each morning, I run through a list of “triggers” – ongoing behavioral changes I’m wanting to work on in my life – and think about how I’m going to nail each one today. In the evening, I give each one a score from one to ten based on how well I pulled it off that day. Almost all behavioral goals I have wind up on this list of triggers.
Going through my trigger list makes up two of the items on my daily to-do list, to be done early in the morning and in the evening.
Again, these to-dos and triggers all spring forth from that series of questions I ask myself about that goal. When that goal is set in a SMART format, I start answering a cascade of questions about it that breaks it down into what I need to do today to move that goal forward, and those things are either to-dos (on my to-do list) or behaviors (on my trigger list).
Step 6 – Even SMARTER – Evaluate and Readjust
Forming a good goal is great. Starting out on the journey to achieving it is great, too. To-dos and triggers are the nuts and bolts of it. But that’s not enough. Your goal will never go perfectly according to plan, ever, and success comes from constantly evaluating and readjusting your goal.
For me, this loops back to the journaling I mentioned early in this post. I do evaluation of my goals constantly in my thinking and in my three morning pages. Is this goal going well? Is it going poorly? What do I need to adjust, if anything?
I usually try to give a goal a month in its current implementation before I make changes. Quite often, the first few weeks don’t show any real results and I want to give it some time. Meditation as a daily practice, for example, didn’t show me any real results for the first three weeks, but now it’s a daily practice of mine; without giving it a month, I would have missed out.
Once a month or so, I go through my ongoing goals carefully. Is this going the way I want it to go? Why or why not? I also re-ask all of those goal breakdown questions and make sure all of the answers still make sense for me.
Again, this seems like extra work at first glance, but this kind of thing is the definition of sharpening the saw. Spending some time making sure that you’re doing sensible things and that you’ve got the tools you need to do them and that everything is in place almost always makes the whole task go far easier, and usually it ends up taking way less time and energy (even including the prep work) than just going about it in a haphazard and unconsidered way. Appreciating the power of sharpening the saw is one of the biggest steps forward I’ve made in my life in the past few years. If you spend time setting yourself up to knock things out of the park by thinking them through and getting ready for them, you’re going to end up with better results in less overall time and with less overall effort than you would have by just attacking them head on without any prep work.
I wish I could say that I had packaged all of this together so neatly during my own financial turnaround, but the truth is that my own turnaround was a lot more haphazard than this. I spent a long time sensing that there was a problem without really delving into it until I almost stumbled completely off a financial cliff, then I fell into a panic mode of homework and haphazardly throwing different tactics at the wall to see what stuck.
It worked solely because I was driven by something I cared deeply about – my sense of responsibility to my own future and that of my child. That pushed me to keep stumbling forward, but it was a stumble for a long while.
Knowing what I know now, the whole process would have been much smoother and much more efficient and less trying in places. If I had worked through the above process as soon as I began to sense something wrong, I would have been in a much better financial position much faster.
Another advantage of this process is that it has often kept me from diving into major goals that won’t end up panning out. I often care about something and want to work on it, but I realize that I don’t care enough to take on the changes in my life and those around me that it would require. Recognizing that early on has saved me from feeling like a failure about not achieving some ambitious goals that I cared about but not deeply enough.
If you have this nagging sense that something is “wrong” in your life – your finances, your relationships, your health, your career, whatever – start working through this process, right from the top. Start by “sharpening the saw” and thinking about what’s actually wrong, and when you’ve figured that out, try to transition it into a goal and see whether or not it fits into your life. It might turn into a life-changing goal, but even if it doesn’t, the process will bring you to a better place where you understand the realities of your life much better than before, and that’s well worth it.