Goal Setting for 2019 - Part I
It's that time of year again.
My normally empty gym is jam packed, people are tightening up after that out-of-control holiday spending, and everyone is participating in something called 'Sober January'. What's going on? New Year's resolutions of course!
Ok, I'll admit it - I may have participated in (and already failed) that last one...
But that's how it always seems to go. Everyone starts the year off so motivated - this time they'll stick to it! This time they won't fail! Then before you know it, the gym is back to it's normal, empty self, that budget is blown, and everyone can't wait to hit that happy hour on Friday after work to wash away the pain of all their broken goals.
But why? Why do New Year's resolutions seem to never make it past the first month of the year? Chances are, if you made a New Year's resolution this year, you've probably already failed. Are we really all just that weak? Should we just all give up on even setting goals?
The answer is NO! We just need to tweak those goals a little bit if we want to actually succeed.
Why We're All Failing Our New Year's Resolutions
The biggest reason that these resolutions never seem to quite pan out is that people generally set a pretty lofty goal for themselves. And a lot of times, it seems like they have no real plan on how to attack it.
Think about it. When's the last time you hear someone talk about a New Year's resolution that actually sounded achievable? It's always "I'm going to lose 50 pounds, get shredded, and have a six-pack by spring break!" and never "I'm going to gradually decrease my calories on a weekly basis, take the stairs at work, and shoot to lose a pound a week".
You might say, "Of course no one makes that resolution. It's boring!". Yes, it is boring. I cringed writing that because it was so boring. But guess what? I would bet money that the second person is a LOT closer to achieving their goal. Even more, if the two people setting these goals were the same weight at the beginning of the year, I'd bet the second person ends up in better shape than the first. Probably by a long shot! Why? Two reasons.
Reason number one: the first goal above, like a typical New Year's resolution, is likely a drastic change from someone's current lifestyle. And drastic changes are hard to keep up with.
As humans, we are creatures of habit. For us to develop new habits, it takes repetition, and a lot of it. It's estimated that it takes anywhere from around 20 to around 250 days to develop a new habit. And guess what? During this time, when your body and mind realize you are breaking an old habit, it is going to fight it. Take this as a lesson: if it's too drastic of a change, you're likely to burn out and revert to old habits.
The second reason: there is no planning involved in that first goal. This goal is nothing but the end result, and whoever made it probably did not think about what they have to do to achieve this end goal.
Of course everybody wants to get in the best shape of their life in the blink of an eye. And I'm going to let you in on a secret... You can! But do you know what you have to do? Count every calorie you take in, eat only clean, whole foods, drink nothing but water, sleep 8 hours a night, go to the gym 6 days a week, etc., etc., etc.... No wonder no one looks as good as they want to.
Setting Achievable Goals
The key in the above example is that the first goal was not achievable. Not only would it require drastic changes, but there was no planning or lead up to these changes. So then how do you set a goal that's achievable?
First, you have to be realistic with your expectations. Let's say you have a goal to add $30,000 in savings this year. That's not going to be a realistic goal for someone who makes $40,000 per year. You've got to eat, pay your rent/mortgage, get back and forth to work somehow, and, oh yeah, Uncle Sam's likely going to take a big chunk of that $10,000 you've left yourself to live on. But for someone who makes, say, $60,000 or more, this could be a perfectly reasonable goal. You first have to take a step back and think about where you are right now. Doing this can help you figure out where you want to be, or how lofty a goal could still be reasonable.
This first step of determining a goal can involve a little bit of data gathering. Let's keep with the above example for now. Let's say you make $40,000 and you want to figure out what a good savings goal would be. With only this information, it's hard to really get an idea of an end goal. But when you start to gather data - you know you pay about $1,000 in rent and utilities per month, $100 per month for your employee health care portion, your car payment is $400 per month, and you typically spend around $500 per month on groceries and going out to eat or drink - you can start to piece together a better picture. So now out of that $40,000 you make, you know that you have $24,000 worth of relatively predictable expenses. Assuming you don't do anything out of the ordinary this year, you're going to take home roughly $16,000 of that $40,000 income before you take taxes into effect. We'll keep taxes to a round number here and say you've got an effective tax rate of 10%, which I don't think would be too far from the truth based on a quick review of the 2019 tax tables (it's almost that time!). Now you know your normal annual savings, without setting any goals or making any spending changes, is $12,000 ($40k salary, tax of $4k, $24k annual expenses).
So now you're done with the first step. You've assessed your current situation, and now you want to move forward with setting a goal to do better. Before you can set that goal, next you have to do some planning. You need to identify some changes you can make to push you in the right direction. Keep in mind, these changes shouldn't be too drastic, or you'll run the risk that you'll burn yourself out too early along. Let's say that you know within that $1,000 you normally spend on rent and utilities, you're paying for some streaming services that you barely even use, and they add up to $20 a month. There's an easy $240 a year in additional savings you've identified - and chances are, you probably won't even miss what you're getting rid of! And maybe you start to think about some bigger changes - maybe you go out to your favorite spot every Friday after work with friends to unwind from the work week, and you know you could save probably $20 each time if you'd just all meet at someone's place instead. That would probably be a more difficult change to make, but if you did you realize you could save yourself $960 a year.
So let's say you're comfortable making both of those changes, and you've got yourself up to a potential savings total of $13,200. You'd be pretty happy with a 10% increase in your savings, right? Before you go ahead and set that goal, you should stop and make sure you're considering everything you can use to your advantage. How about that $4,000 tax expense - a necessary, unavoidable evil? Not necessarily. Maybe you've always been putting off contributing to that 401k at work, or maybe you're not offered a 401k, and you've been too lazy to set up an IRA account. Now let's say you realize you've got $13,200 that you're not expecting to even touch this year, and you decide to put $5,000 into one of these tax-advantaged accounts. Not only did you guarantee that money is going straight to savings (I think the early withdrawal penalty should keep you from pulling that money out to spend it anytime soon), but you've also just knocked an extra $500 off your tax bill. And that's without giving anything up at all! That sounds like some pretty easy saving to me.
Now you've got a plan to increase your annual savings from $12,000 to $13,700 - an increase of over 14% without even increasing your income. At this point, you can really visualize what it will take to get there, and you can decide for yourself on a final goal. Even though I used a financial goal as an example here, these steps can be used to set goals of all kinds. You just have to be realistic with yourself and really think about where you currently are, analyze the changes you can make to move yourself in the right direction, and then ultimately, decide how far you want to take it!
The Next Steps to Success
So you've got your goals all set - now what? How do you make sure you succeed?
One of the best ways to hold yourself accountable for following your goals is to not leave it all up to yourself. Tell your goals to someone. Tell a friend, tell your significant other, tell your parents - really, tell anyone that you know won't be afraid to remind you of your goals when the going gets tough.
Another way to keep yourself from giving up can be to write down your goals and the reasons you wanted to achieve them in the first place. Leave it somewhere that you know you'll come across frequently. When you start breaking your old habits, and your mind or body start to push back, take a look back at the reasons why you made the goal. It can serve as some valuable motivation when your motivation has seemingly run dry.
One last piece of advice I will leave you with to ensure the success of your goal, and what I believe to be the single most important piece of advice, is that consistency is key. Often the reason people don't achieve their goals is not because they don't know what they need to do. Often people know exactly what they need to do - they've done all this research on how to achieve their goal, and they could probably write a book, from start to finish, on how to achieve that goal - but they just don't do it. People have bad days. Maybe you're just too tired to even think about going to the gym. Maybe the market is taking huge swings every day and you're too scared to leave your automatic investing turned on. This is when it's most important to to stick to your guns. If you start making excuses and skipping the gym on bad days, you're going to find that you're going to start lowering that threshold for what you consider a 'bad day'. If you start only investing on red days, you might soon find yourself a full week of green days later with nothing to show for it. *Side note: Please don't try to time the market. You're not that smart - it's always a bad idea.*
Once you start powering through those bad days, you learn that it becomes a lot easier to stay on track. I can say from experience that when you stay consistent and work towards a goal, rain or shine, your work will pay off. If you start making excuses, you'll find yourself further down the road just wishing you'd kept up with your plan. I've found myself on both sides of the track before, and it should be obvious which side feels better at the end of the day.
--
As always, unforeseen events can happen that force us to change our goals, or even abandon some altogether. This is where you need to take a step back and think about your priorities given a new situation. Goals can be fluid, they don't have to be set in stone. If you find that your goals might need a tweak here or there, take yourself back to the first step and work your way back through.
I have titled this article 'Part I' as I am currently in the process of setting some goals for myself in the spirit of the new year. Once I have them set, I'll be adding a 'Part II' post to share with you the goals I'd like to achieve before the end of 2019, and how I plan to attack each one. So please, stay tuned! And in the meantime, have you set any goals lately? Maybe you've achieved a personal goal recently. If so, or if you have any questions or comments on my goal setting process, please feel free to drop a comment below!
- FI Anon
My normally empty gym is jam packed, people are tightening up after that out-of-control holiday spending, and everyone is participating in something called 'Sober January'. What's going on? New Year's resolutions of course!
Ok, I'll admit it - I may have participated in (and already failed) that last one...
But that's how it always seems to go. Everyone starts the year off so motivated - this time they'll stick to it! This time they won't fail! Then before you know it, the gym is back to it's normal, empty self, that budget is blown, and everyone can't wait to hit that happy hour on Friday after work to wash away the pain of all their broken goals.
But why? Why do New Year's resolutions seem to never make it past the first month of the year? Chances are, if you made a New Year's resolution this year, you've probably already failed. Are we really all just that weak? Should we just all give up on even setting goals?
The answer is NO! We just need to tweak those goals a little bit if we want to actually succeed.
Why We're All Failing Our New Year's Resolutions
The biggest reason that these resolutions never seem to quite pan out is that people generally set a pretty lofty goal for themselves. And a lot of times, it seems like they have no real plan on how to attack it.
Think about it. When's the last time you hear someone talk about a New Year's resolution that actually sounded achievable? It's always "I'm going to lose 50 pounds, get shredded, and have a six-pack by spring break!" and never "I'm going to gradually decrease my calories on a weekly basis, take the stairs at work, and shoot to lose a pound a week".
You might say, "Of course no one makes that resolution. It's boring!". Yes, it is boring. I cringed writing that because it was so boring. But guess what? I would bet money that the second person is a LOT closer to achieving their goal. Even more, if the two people setting these goals were the same weight at the beginning of the year, I'd bet the second person ends up in better shape than the first. Probably by a long shot! Why? Two reasons.
Reason number one: the first goal above, like a typical New Year's resolution, is likely a drastic change from someone's current lifestyle. And drastic changes are hard to keep up with.
As humans, we are creatures of habit. For us to develop new habits, it takes repetition, and a lot of it. It's estimated that it takes anywhere from around 20 to around 250 days to develop a new habit. And guess what? During this time, when your body and mind realize you are breaking an old habit, it is going to fight it. Take this as a lesson: if it's too drastic of a change, you're likely to burn out and revert to old habits.
The second reason: there is no planning involved in that first goal. This goal is nothing but the end result, and whoever made it probably did not think about what they have to do to achieve this end goal.
Of course everybody wants to get in the best shape of their life in the blink of an eye. And I'm going to let you in on a secret... You can! But do you know what you have to do? Count every calorie you take in, eat only clean, whole foods, drink nothing but water, sleep 8 hours a night, go to the gym 6 days a week, etc., etc., etc.... No wonder no one looks as good as they want to.
Setting Achievable Goals
The key in the above example is that the first goal was not achievable. Not only would it require drastic changes, but there was no planning or lead up to these changes. So then how do you set a goal that's achievable?
First, you have to be realistic with your expectations. Let's say you have a goal to add $30,000 in savings this year. That's not going to be a realistic goal for someone who makes $40,000 per year. You've got to eat, pay your rent/mortgage, get back and forth to work somehow, and, oh yeah, Uncle Sam's likely going to take a big chunk of that $10,000 you've left yourself to live on. But for someone who makes, say, $60,000 or more, this could be a perfectly reasonable goal. You first have to take a step back and think about where you are right now. Doing this can help you figure out where you want to be, or how lofty a goal could still be reasonable.
This first step of determining a goal can involve a little bit of data gathering. Let's keep with the above example for now. Let's say you make $40,000 and you want to figure out what a good savings goal would be. With only this information, it's hard to really get an idea of an end goal. But when you start to gather data - you know you pay about $1,000 in rent and utilities per month, $100 per month for your employee health care portion, your car payment is $400 per month, and you typically spend around $500 per month on groceries and going out to eat or drink - you can start to piece together a better picture. So now out of that $40,000 you make, you know that you have $24,000 worth of relatively predictable expenses. Assuming you don't do anything out of the ordinary this year, you're going to take home roughly $16,000 of that $40,000 income before you take taxes into effect. We'll keep taxes to a round number here and say you've got an effective tax rate of 10%, which I don't think would be too far from the truth based on a quick review of the 2019 tax tables (it's almost that time!). Now you know your normal annual savings, without setting any goals or making any spending changes, is $12,000 ($40k salary, tax of $4k, $24k annual expenses).
So now you're done with the first step. You've assessed your current situation, and now you want to move forward with setting a goal to do better. Before you can set that goal, next you have to do some planning. You need to identify some changes you can make to push you in the right direction. Keep in mind, these changes shouldn't be too drastic, or you'll run the risk that you'll burn yourself out too early along. Let's say that you know within that $1,000 you normally spend on rent and utilities, you're paying for some streaming services that you barely even use, and they add up to $20 a month. There's an easy $240 a year in additional savings you've identified - and chances are, you probably won't even miss what you're getting rid of! And maybe you start to think about some bigger changes - maybe you go out to your favorite spot every Friday after work with friends to unwind from the work week, and you know you could save probably $20 each time if you'd just all meet at someone's place instead. That would probably be a more difficult change to make, but if you did you realize you could save yourself $960 a year.
So let's say you're comfortable making both of those changes, and you've got yourself up to a potential savings total of $13,200. You'd be pretty happy with a 10% increase in your savings, right? Before you go ahead and set that goal, you should stop and make sure you're considering everything you can use to your advantage. How about that $4,000 tax expense - a necessary, unavoidable evil? Not necessarily. Maybe you've always been putting off contributing to that 401k at work, or maybe you're not offered a 401k, and you've been too lazy to set up an IRA account. Now let's say you realize you've got $13,200 that you're not expecting to even touch this year, and you decide to put $5,000 into one of these tax-advantaged accounts. Not only did you guarantee that money is going straight to savings (I think the early withdrawal penalty should keep you from pulling that money out to spend it anytime soon), but you've also just knocked an extra $500 off your tax bill. And that's without giving anything up at all! That sounds like some pretty easy saving to me.
Now you've got a plan to increase your annual savings from $12,000 to $13,700 - an increase of over 14% without even increasing your income. At this point, you can really visualize what it will take to get there, and you can decide for yourself on a final goal. Even though I used a financial goal as an example here, these steps can be used to set goals of all kinds. You just have to be realistic with yourself and really think about where you currently are, analyze the changes you can make to move yourself in the right direction, and then ultimately, decide how far you want to take it!
The Next Steps to Success
So you've got your goals all set - now what? How do you make sure you succeed?
One of the best ways to hold yourself accountable for following your goals is to not leave it all up to yourself. Tell your goals to someone. Tell a friend, tell your significant other, tell your parents - really, tell anyone that you know won't be afraid to remind you of your goals when the going gets tough.
Another way to keep yourself from giving up can be to write down your goals and the reasons you wanted to achieve them in the first place. Leave it somewhere that you know you'll come across frequently. When you start breaking your old habits, and your mind or body start to push back, take a look back at the reasons why you made the goal. It can serve as some valuable motivation when your motivation has seemingly run dry.
One last piece of advice I will leave you with to ensure the success of your goal, and what I believe to be the single most important piece of advice, is that consistency is key. Often the reason people don't achieve their goals is not because they don't know what they need to do. Often people know exactly what they need to do - they've done all this research on how to achieve their goal, and they could probably write a book, from start to finish, on how to achieve that goal - but they just don't do it. People have bad days. Maybe you're just too tired to even think about going to the gym. Maybe the market is taking huge swings every day and you're too scared to leave your automatic investing turned on. This is when it's most important to to stick to your guns. If you start making excuses and skipping the gym on bad days, you're going to find that you're going to start lowering that threshold for what you consider a 'bad day'. If you start only investing on red days, you might soon find yourself a full week of green days later with nothing to show for it. *Side note: Please don't try to time the market. You're not that smart - it's always a bad idea.*
Once you start powering through those bad days, you learn that it becomes a lot easier to stay on track. I can say from experience that when you stay consistent and work towards a goal, rain or shine, your work will pay off. If you start making excuses, you'll find yourself further down the road just wishing you'd kept up with your plan. I've found myself on both sides of the track before, and it should be obvious which side feels better at the end of the day.
--
As always, unforeseen events can happen that force us to change our goals, or even abandon some altogether. This is where you need to take a step back and think about your priorities given a new situation. Goals can be fluid, they don't have to be set in stone. If you find that your goals might need a tweak here or there, take yourself back to the first step and work your way back through.
I have titled this article 'Part I' as I am currently in the process of setting some goals for myself in the spirit of the new year. Once I have them set, I'll be adding a 'Part II' post to share with you the goals I'd like to achieve before the end of 2019, and how I plan to attack each one. So please, stay tuned! And in the meantime, have you set any goals lately? Maybe you've achieved a personal goal recently. If so, or if you have any questions or comments on my goal setting process, please feel free to drop a comment below!
- FI Anon
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