Goals

When it comes to personal finance, what matters is not beating some index. What matters is meeting your goals.

An index, of course, is just a broad measure of how a particular market has done. Think of it as the average. The investment industry seems to think their entire purpose in life is to convince you that the best thing you could ever do is hire someone to help you beat an index.

Whether that’s even possible is debatable, but let’s just focus on why it doesn’t even matter.

Pretend you live in some magic fantasy world where all of your dreams (according to the investment industry) come true, and you actually beat an index every quarter for your whole life. I hate to burst your bubble, but it’s completely possible—even in that unlikely scenario—that you don’t meet any of your financial goals.

Why? Because beating an index has nothing to do with meeting your personal financial goals! That has everything to do with careful financial planning.

Now let’s flip that scenario on its head. You slightly underperform the index every quarter for your whole life. But because of careful financial planning, you meet every one of your financial goals.

Doesn’t that sound a heck of a lot better?

-Carl

P.S. As always, if you want to use this sketch, you can buy it here.

When tackling big, audacious goals, you don’t need big, audacious actions. All you need is the contagious magic of micro-actions.

Let me give you an example. 

When I travel, I often don’t feel like exercising, even though I know I’ll feel way better if I do. So, in the morning, I don’t commit to a program to lose 12 pounds in 12 days or promise myself to run for 40 minutes. I just put on my gym clothes. 

That’s it. 

And then, since my gym clothes are on, I almost always decide to just walk to the gym and take a look. 

What happens next is what almost always happens when I step into a gym: I see the bikes and think, “I bet it will feel good to get on one of those for a few minutes.” So I do.

And other exercises naturally follow that.

After I exercise, I think, “Man, it would feel great to stretch,” so I do that, too. And then, since I’m on a roll, I decide to eat a healthy breakfast instead of sugary garbage. Later at work, I’m extra productive since my body feels great. 

See what I mean about contagious? 

There’s a reason why 80% of New Year’s Resolutions fail. The problem isn’t the goals, it’s the way we go about trying to tackle them. We try to go big and burn out, forgetting that “slow and steady wins the race.”  

The magic here is in breaking down big, hard, and sometimes even scary goals into attainable pieces. “What’s the next smallest thing I can do?” Find something small and attainable you can do, start there, and let the contagious magic of micro-actions do the rest.

-Carl

P.S. As always, if you want to use this sketch, you can buy it here.

Everybody talks about getting ahead.

What I want to know is… ahead of what? Of who? And why? To what end?

Because, it turns out, “getting ahead” is not only super vague, it’s also just not a great goal.

The problem with getting ahead is that it’s a zero-sum game. There’s only one winner.

And in this game, even the winners are losers. How many of us want to be remembered as the person who spent their whole life striving to get ahead of everyone else?

This may come as a shock, but you don’t have to participate in this game—constantly battling against the competition (which, by the way, is everyone else in the world).

Seriously. You could work less. Spend less. Sleep more. You can quit your job and start something new. Instead of trying to get ahead, you could try to get clear. You know… on your values, your goals, and your deepest desires.

Maybe nothing new would happen. But maybe, just maybe, you’d discover that “getting ahead” was never what you wanted in the first place.

-Carl

P.S. As always, if you want to use this sketch, you can buy it here.

We are really good at managing risk by looking backward and preparing ourselves to handle a situation we’ve already seen. But we’re not very good at managing risk by looking forward and preparing ourselves for something we can’t even imagine.

The problem is, “something we can’t even imagine” is precisely what we need to be prepared for. Because risk is what’s left over after you think you’ve thought of everything.

It’s not the car you see coming that will kill you… it’s the one you don’t.

Bummer, right?

Let me be clear: This doesn’t mean you should cover yourself in bubble wrap and lock yourself in your house.

The point is simply to foster general resilience. You know—like an emergency fund.

And guess what, emergencies will happen. When they do, general resilience provides a margin of safety.

That’s what will protect you from the thing you never saw coming… not trying to predict the future and certainly not bubble wrap.

-Carl

P.S. As always, if you want to use this sketch, you can buy it here.

My friend, Reem Kassis, has an amazing story that can teach us a lot about getting things done.

Reem grew up in Jerusalem, came to the United States, got an undergraduate degree at the University of Pennsylvania, got a job as a consultant for McKinsey & Company, and then took a leave to have her first child.

Around that time, she decided she wanted to make a cookbook. She wasn’t a writer or a chef. She didn’t have a side hustle at a restaurant, a blog, or an Instagram account. All she had was a dream.

Oh, and she had roadblocks. Enough roadblocks that most people would have labeled her dream unrealistic and given up.

But instead of giving up, Reem just asked one incredibly powerful question: What’s the next smallest step?

At one point, the answer to that question was to go to the bookstore and look at cookbooks. Then the answer was to read the acknowledgments in the books she liked. Then it was to research all the agents whose names she found. Then it was to send targeted query letters, one agent at a time.

Eventually, she landed an agent, and now there’s a published cookbook with her name on it. Of course, there’s much more to the story, but the important point here is the power of thinking in terms of the next smallest step.

I can’t guarantee that if you follow the next smallest step formula, you will succeed. But I can guarantee that if you don’t take any steps at all, nothing much will come of your idea.

-Carl

P.S. As always, if you want to use this sketch, you can buy it here.

One of the big problems with setting goals is that we’re really bad at imagining our future self.

Remember what you imagined you’d be as an adult when you were a kid? I’m guessing there are some gaps between that dream and your current reality.

In the same way, there will be gaps between your current reality and your future self. And that’s partially because when we talk about goals, we’re often talking about long time frames. Consider retirement, for example. That could be upwards of 20 or 30 years from now. You can’t even imagine yourself at that age, let alone plan for it. That’s your parents, not you!

When we start talking about our distant future self, it’s easy to rationalize the decision to not do anything. Something 30 years down the road sounds an awful lot like something that can be started tomorrow.

In fact, our future self can often feel like some other annoying person constantly stealing heaps of fun from our current self.

And yet, while our future self may feel like a big old pain in the neck, it’s important to realize that appeasing that person is still very much in our best interest.

You may feel like you’re still 30, but if you just celebrated (or mourned) turning 40, it’s time to get real. Our future self will be here faster than we think. Remember all the stupid stuff you did as a teenager? Don’t continue doing the same stupid stuff as an adult.

-Carl

P.S. As always, if you want to use this sketch, you can buy it here.

Real change doesn’t happen all at once. Real change is incremental.

I experienced this firsthand when I used to ride road bikes with a semi-competitive group. I remember when I first joined the group, it felt like a big victory if I could just keep up with them for the first 15 minutes. After a while, that became the first half-hour. Then, an hour. One day, almost without even noticing it, I was suddenly able to stick with the pack for the entire ride.

It felt sudden at the time, but, of course, it wasn’t. And although I was surprised, nobody else was, because they had all seen it before with other riders or experienced it themselves.

This is the sneaky power of incremental change. You make a small improvement, that becomes the new normal, you get used to it.

You make a small improvement again. That becomes the new normal again. You get used to it again. On and on the cycle goes.

Because incremental change is so sneaky, we barely ever notice we are getting closer to our goal, and then (again, seemingly “all of a sudden”) we’re there!

I didn’t feel a lot faster because I wasn’t a lot faster… at least, not compared to yesterday or even last week. In fact, I was just a little faster than I was last month. But month after month, ride after ride, it all added up. All those little bits of “faster” started to compound on top of one another, and that is how I was able to keep up in the end. Incrementally.

Of course, this doesn’t just apply to riding bikes…

-Carl

P.S. As always, if you want to use this sketch, you can buy it here.

You know what I feel when somebody tells me to list my financial goals?

I feel a weight on my shoulders. Tension in my neck. This emotion bubbling up in me, saying, “I don’t know!”

Guess what: If you feel that way too, you are not alone.

I have asked thousands of people about their financial goals, and almost universally, the question seems to generate emotional dread.

And yet, the research is pretty clear that having goals is helpful.

So how do we deal with this?

I’ve got a couple of ideas I think might help.

1. Goals are guesses. No one knows exactly what they’re going to be doing 17.5 years from now. No sense in laboring over a false sense of precision. Just guess.

2. Goals are flexible. It’s possible to be completely committed to a goal and, at the same time, open to changing it. Remember, it was just a guess.

3. Goals are personal. Your goals are your own. Not your neighbor’s or that person on Instagram. Yours. And since they are yours… you don’t have to worry about them being wrong!

4. Big goals require small steps. Having a big, scary goal gets you out of bed. Repeatedly taking the next smallest step toward that goal keeps you moving.

Keep this in mind. Because I guarantee you will be asked—at some point, by someone—to list your financial goals. And trust me, it will help you tremendously to have an answer (or at least an idea) when that time comes.

-Carl

P.S. As always, if you want to use this sketch, you can buy it here.

There’s something you’ve been working on.

Something you’ve always dreamed of.

It’s the business you’re going to launch. The novel in final edits. The podcast you’re about to release.

And it’s so close!

Can I just ask you something? What’s stopping you from putting this thing out into the world?

I have a hunch I know the answer to that question, and I bet you do, too.

You’re scared.

Right? The reason is fear.

That’s why this thing is perpetually “almost there.” We never finish because we hide behind the little things. What color should the logo be? What font should I use? I can’t find an agent.

Let me be clear about something. What is holding you up isn’t the size of your font—it’s the size of your fear.

The reason our work never feels finished is not because we are perfectionists, it’s because we are scared nobody will like it, scared it won’t work out, scared of failing.

The way we deal with that fear is by picking a roadblock and hiding behind it, just like when we were children and hid under the blankets from the monster in the closet.

Don’t get me wrong—being scared is normal, human, and totally OK. The problem is letting our fears prevent us from making the quantum leap between “The Thing I Want To Do” and “Actually Doing It.”

The key to getting to 100 percent is understanding why we are really stuck at 99 percent. It’s not about any specific roadblock. It’s about fear.

-Carl

P.S. As always, if you want to use this sketch, you can buy it here.

What if instead of making big goals around the new year or during a life change, we focused instead on making small, incremental changes? At the New York Times, I outlined three steps to get you closer to your goals.

This column, titled A Plan for 2012 That You’ll Actually Follow, originally appeared in The New York Times on December 26, 2011.

For 2012, I have a challenge for you: make financial decisions on purpose. Too much of what we do is based on habits and assumptions instead of a thoughtful plan. During the next year, see what happens when you do these three things:

1) Define your current reality. I used to think this was the easy part. Turns out I was wrong. Most people don’t know where they actually stand financially.

After the last few years, it’s tough to face the reality of our situations. Even if you have a sense that things have gone well for you financially, building a personal balance sheet doesn’t rank very high on the fun meter, but it has to be done. It makes it hard to reach any goal if you have no idea where you are starting from.

2) Set some goals. This step hangs people up because often we have no idea what we will be doing in five days, let alone five years. Still, it’s really hard to get somewhere if you don’t know where you’re going.

Let go of the need for precision. These are guesses, so make the best guess you can and move on. How important is paying for college for your child or children (or grandchildren)? Define it a bit. How much will it cost, what can you save, when will it happen?

Be honest. Be realistic. Of course part of this process will involve making some assumptions about rates of return you will earn. Be conservative and focus instead on having realistic goals and saving more. If you can’t save more, maybe spend some time trying to earn a bit on the side.

3) Commit to course corrections. Plan on then, in fact. Break down what you have to do into quarterly action steps, and then revisit the plan every three months.

If you are off course, make changes while you’re only a little bit off. If you leave Los Angeles on a flight to New York City and you’re a half inch off course, it’s much easier to adjust when you are over Nevada than it will be a few miles outside of Miami.

Planning for a better financial future is a continuing process, not a single event. It is also short-term boring but long-term exciting.

In 2012, commit to doing small, simple things consistently and over time. It will be the opposite of what we’ll hear in the news every day about making enormous changes, so part of the challenge will be to ignore the constant call for rash actions and sweeping reform.

Let’s make 2012 about subtle, small actions so we can make progress towards our goals over a long period of time.