Personal Finance and Grit

A few weeks ago, I made an offhand mention in a reader mailbag about the wonderful book Grit: The Power of Passion and Perseverance by Angela Duckworth.

Duckworth defines grit in very simple terms – it’s simply perseverance and passion for long-term goals. Since long-term goals are a huge part of personal finance success, there’s naturally a lot of overlap between this idea of grit and some of the smarter strategies for your money.

Grit offers up a four-step recipe for, well, grit:

Step one: Identify a burning passion.
Step two: Practice it with commitment.
Step three: Find inner purpose in your work.
Step four: Persevere when things get hard.

Together, these elements significantly improve the chances of an individual succeeding at a big long-term goal.

The problem with terms like this, which is similar to the problem that one might find in other similar business and “big idea” books, is that it doesn’t really dig down into how to translate such talk into day-to-day practical use. Things like “identify a burning passion” sound great, but how do they really work when it comes to real life or when it comes to more mundane things like retirement savings?

I actually find that the “grit” framework here lines up pretty well with my own experience of making a big, tough goal work – yes, even with money goals.

Applying the ‘Grit Steps’ to Money Goals

Why do people struggle with long-term money goals?

That’s really the $64,000 question, isn’t it? If we truly understood why people didn’t succeed at the goals they come up with for themselves, then it would be easy to help almost anyone with an adequate income to save for retirement and achieve their dreams.

But it’s not that easy. We’re tempted by things. The very resource we need to achieve things like a secure retirement or a better rebooted career – money – is the very resource that drains out of our hands due to the temptations of modern life.

Can Duckworth’s framework really help with that challenge? I say yes, and here’s how.

Step One: Identify a Burning Passion

I think this is the very point at which people get into trouble with long-term money goals. It is hard to be passionate about retirement or other long-term financial goals.

Many people, when they’re young and they’re at the point in their lives where retirement savings is the easiest and most beneficial, find it very hard to visualize retirement. They can scarcely envision themselves getting old. They almost can’t imagine having a pile of money in the bank that would sustain them in retirement age – try talking about having multiple millions in savings to a 23-year-old making $35,000 a year. All of it feels so incredibly out of reach.

That’s why it’s important to not focus on the money and not focus on the idea of a traditional retirement. Both of those things are unrelatable as can be.

Instead, focus on what you think would be the absolute best things you’d love to be doing with your sixth and seventh decades on this earth. Starting at about age 50 or 55, what would you do if earning an income were no object?

If this were me, I’d get into my vehicle and start towing a camper around the country to visit every single national park. I’d camp at each one for a good week or two. I’d hit the Alaska parks in the summer by driving through Canada. I’d walk trails and backpack around every day until my somewhat older bones begged for rest, then I’d head back to the campsite and build a fire and crash for a few hours with my wife, reading books until the daylight faded away.

That. Sounds. Awesome. Just the thought of spending six months to a year of my life (or more) doing that sounds beyond incredible to me. It gets me excited just thinking about that.

That’s my burning passion. It’s that picture of my wife and I visiting all of the national parks, walking on trails together without a worry in the world. I want that picture so bad I can taste it.

It’s a long-term goal. It’s not entirely realistic at this point, with three relatively young children at home. So, what do I do? I keep that goal in mind each time I make a hard financial choice. When I choose to save, I remember that big beautiful picture.

What’s your amazing vision for the future? What kinds of things do you dream about doing?

Step Two: Practice It with Commitment

Once you have that big vision in mind, ask yourself what you need to do to make that big vision become a reality.

Most financial goals start with one key element: You’ve got to have a lot of money in the bank. It might be enough for retirement, or it might be the initial investment you need for a business. Whatever your dream, it usually starts with a pile of cash. A good retirement target for most Americans is $1 to $2 million.

From there, it’s all about breaking down that pile of cash. Start off by asking yourself how many years there are until you’re 55 or 60 or 65 or whatever your target age might be. Perhaps there are thirty years left, which is good.

The next question: How much do I have to save each year, assuming an average of a 7% annual return, to make it to my target number? This requires some number crunching, but here’s a rough estimate for you – divide your total target number by 100 and you’ll be pretty close to the amount you need to save each year to hit your thirty year target. So, if you want to hit the $1 million mark in 30 years, divide $1 million by 100 and you’ve got yourself an annual goal of $10,000. The more you save, the faster you get there; the less you save, the slower.

Divide that by 12 and you have your monthly goal (about $850). Divide the annual amount by 52 and you have your weekly goal (about $200). I suggest dividing it down so you know how much you have to save each and every pay period.

That is your goal, each and every week (or each and every month). It’s your recipe for achieving your dream.

How do you turn it into a commitment? Automate it. Sign up for automatic contributions to your retirement plan at work. Set up a Roth IRA on your own and set up automatic contributions to that. Set up a normal taxable investment account and set up automatic contributions. You want that savings to occur without even having to think about it, so that the commitment doesn’t waver even when life gets crazy and your big goal isn’t right at the front of your mind.

Step Three: Find Inner Purpose in Your Work

Most people view their jobs as drudgery, something they have to do in order to have “fun” in their spare time. I tend to view my work differently – I view it as the time and energy I’m trading right now to have that amazing goal later on. Every time I do an exceptionally good job, I secure my current work and put myself in line to earn more money, which means my goal moves closer and closer to reality because I can save more each week/month/year.

In other words, I tie that big beautiful goal of mine into my daily motivation at work. Every single day that I hit a home run in my professional life, I bring that goal a little bit closer because I’ve increased my chances for better pay.

Still, that’s an external motivation. What about internal motivation? Having both kinds of motivation is kind of like setting off a rocket at your back, propelling you to career success.

Internal motivation is different for everyone. Some people are motivated by the desire to improve themselves. Others are motivated by curiosity. Still others are motivated by helping others or by doing creative things or by the big overall mission of their work.

Even if you find your job miserable, there is likely something about it that you value. Maybe it’s the quiet moments when you can do interesting work. Maybe it’s the camaraderie with coworkers. Whatever it happens to be, accentuate it. Look for opportunities to maximize that part of your job while still pleasing your employer.

In other words, don’t try to build internal motivation on a weak structure. Look for the motivation you already have, then look for ways to do that thing more, whatever it might be.

Step Four: Persevere When Things Get Hard

There are times when this journey is going to seem terrible. The goal is going to seem way too distant. You’re going to feel like you’re giving up things you want today for it and it’s going to seem like a bad trade. You’re going to completely loathe your current job.

At those moments, the difference maker is perseverance. Put your head down and push through them. If possible, look for a way to move around the problem by finding a new job.

What you’ll find is that over time, the bad parts of life tend to fade away and the good parts remain and grow stronger. Your mind naturally discards the bad and keeps the good. That’s why most of our memories are positive ones (yeah, there are always a few negative ones, but they’re usually far outnumbered by the good ones). Our brain holds onto the good stuff.

This is also where automation helps. In those dark moments, it’s often easy to stop pushing toward those big goals, and if you left things up to your own means, you’d probably choose to stop saving. Automatic savings makes that much harder – rather than just passively choosing not to do anything, you have to actively turn it off, and most of the time, you won’t do that.

Final Thoughts

The recipe for grit for your financial goals is simple. Dream up a big goal. Break it down. Automate your steps toward that goal. Motivate yourself at work, internally and externally. Push through when it’s tough and rely on that automation.

It’s that very recipe that will make it possible for you to stick to that big goal year after year, and then before you know it, that goal will start seeming more and more and more real as you get closer and closer to it. Suddenly, you’ll have that big vision you dream of.

It’s up to you – and a little bit of grit.

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