Goals

When it comes to personal finance, what matters is not beating some index.

What matters is meeting your goals.

Those are not the same thing.

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 that 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.

For the purpose of this email, I’d like to set aside the entire debate about whether that’s even possible and focus on why it doesn’t even matter.

Pretend that 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. Congratulations!

Let me just be clear about something: It’s still possible, even under that fantasy scenario, that you don’t meet any of your financial goals.

Because beating an index has nothing to do with meeting your personal financial goals!

So here’s my question: You landed in Shangri La, according to the financial industry. You beat the index. But you didn’t meet your goals. Are you happy?

The answer is, “No.”

Now let’s flip that scenario on its head. The worst thing in the world happens to you (again, according to the investment industry). 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. Let me repeat the question: Are you happy?

And the answer is obviously… “Yes.”

Stop worrying about beating indexes. Focus instead on meeting your goals.

-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. Because micro-actions spread. 

Let me give you an example. 

When I travel, I often don’t feel like exercising. But I know I’ll feel way better if I do. So you know what I do when I get up in the morning? I don’t commit to a program to lose twelve pounds in twelve days or promise myself to run for forty minutes. I just put on my gym clothes. 

That’s it. 

And then, since my gym clothes are on, I walk to the gym. 

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.” 

I exercise, I stretch, and then I decide to eat a healthy breakfast instead of sugary garbage since I’m on a roll. 

Later at work, I’m extra productive since my body feels great. Etc, etc. See what I mean about contagious? 

Turns out, micro-actions are almost always more effective than grand gestures. There’s a reason 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.” 

If I had woken up and said to myself, “Okay, today, you are going to exercise for an hour, eat a healthy breakfast, and get a ton of work done,” that would have felt awfully daunting. Maybe I would’ve shrunk in fear from such a hard day and never set foot in the gym at all. 

But I didn’t do that. I took a micro-action instead, and that’s why I was successful. 

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?” That’s the question you’re trying to answer. 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.

Getting ahead is overrated as a goal. In fact, it might even be just plain stupid. 

The problem with getting ahead is that it’s a zero-sum game. There’s only one winner. And in this game, it’s possible that even the winners are losers. How many of us want to be remembered as the person who spent their lives striving to get ahead of everyone else? 

Instead of fixating on getting ahead, what if we simply focused on having enough? 

Turns out, you’re allowed to do that! 

You don’t have to participate in a game that will constantly pit you against the competition (i.e., everyone else in the world). You can opt for simple satisfaction instead. 

Just for a minute, imagine what it might feel like to be satisfied with simply having “Enough.” How might that change your priorities? Your daily schedule? It’s important you actually sit down and think about it because only you can define “Enough.” 

What I’m hoping to accomplish here is just to encourage or allow or create space for you to explore this idea a bit. That’s all. 

What might happen if you were to make this shift? Would you work less? Would you spend less? Would you sleep more? Would you quit your job and start something new? Would you give more to charity? 

Maybe nothing new would happen. But what I can tell you is this: If you can’t find a way to be satisfied with enough, you may never be satisfied with anything. There will always be someone else ahead of you, even if the only person ahead of you is the future self you are constantly killing your current self to become. 

Now tell me, does that sound like how you want to live?

-Carl

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

Risk is what’s left over after you think you’ve thought of everything. 

We are really good at managing risk by looking backward and preparing ourselves to handle a situation we’ve already seen… only better this time. 

But we’re not very good at preparing for something we can’t even imagine. 

That’s a real bummer because “something we can’t even imagine” is precisely what we need to be prepared for. 

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: The point of this is not to cover yourself in bubble wrap and lock yourself in the house. Nor is the point to create specific event-based insurance for all possible worst-case scenarios. 

The point is simply to foster general resilience. 

You know—like an emergency fund. 

Because, guess what… emergencies will happen. And 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.

Let me tell you a little story. 

It’s the story of a consultant who had a scary idea. She wanted to publish a cookbook. She had no background in writing, publishing, cooking, blogging, or anything related to that goal. 

In this tall tale, the consultant left her job to follow her dreams, as the cliché goes. And the next thing you know, the story unfolds just as you would have hoped. The universe conspires—magically!—to give her a helping hand. She finds an agent and snags a contract with a top publisher. She even gets the television personality Anthony Bourdain, a famous chef, to do the blurb on the book cover. 

Cool story, right? But we all know stories like this one don’t really happen. You need a degree from the literary star-makers at the University of Iowa Writers’ Workshop, a successful stint on “Iron Chef,” or at least 10,000 Instagram followers before you can even dream of doing something like that. 

But wait! This story is actually true. The woman who made it happen is Reem Kassis, and her cookbook is “The Palestinian Table.” I know the story because she wrote me to share it after she read a column I wrote about overcoming whatever fears get in your way when chasing big ideas. 

So why share the story? Not because it is so crazy, but because it is so sane. The way Ms. Kassis pursued her scary thing is practical and repeatable. She did things that anyone can do, as long as they have the nerve to try to do something hard and scary in the first place. 

Ms. Kassis grew up in Jerusalem but came to the United States to pursue an undergraduate degree at the University of Pennsylvania. She eventually worked as a consultant for McKinsey & Company before leaving to have her first child. 

It was around then that she decided to give this far-fetched cookbook idea a shot. She was not dabbling in writing at the time. She didn’t have a side hustle making food at a restaurant. She didn’t have a blog or an Instagram account. All she had was a stake in the ground and a direction she wanted to go. 

Oh, and she had those roadblocks. Enough roadblocks that most people would have labeled such an idea unrealistic and given up. 

But one pattern I’ve noticed in people who do scary things is that once they see the roadblocks in their way, they take a specific kind of action to begin to break them down—a micro-action. Having figured out the big goal, they focus on the next, smallest action that will get them a bit closer to it. 

Because Ms. Kassis wanted to publish this book in a traditional way, the most obvious roadblock was her lack of a publisher. To get one to take you seriously, you generally need an agent. To get an agent, you need to send what’s known as a query letter. (See how we’re moving from big, insurmountable roadblocks to smaller actions?) 

But first, you need to figure out which agents to approach. So here’s what Ms. Kassis did first: She went to the bookstore, picked up a cookbook, and read the acknowledgments section. She noticed that the author thanked an agent in the acknowledgments, and she wrote down the name of the agent. 

There is more to this story, but please note how micro this action was: a trip to the bookstore. Having noted the name of one agent in one cookbook, the next smallest step was to pick up another one. She repeated these steps with every cookbook she could find until she had a list of agents. 

The next smallest step was to go home and research those agents, one at a time. That allowed her to write each of them very targeted emails. Because she was so thorough in her research, she got an almost unheard-of response rate. Eventually, she landed an agent, and now there’s a published cookbook with her name on it. 

Once you’ve identified the scary thing you want to do, don’t obsess over all the reasons you can’t do it. Get quiet and ask yourself one simple question: What needs to be done next? Then look for the next smallest action you can take. Do that thing. Ask again. Repeat. 

I can’t guarantee you will succeed​ if you follow the Next Smallest Action formula. 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.

Who do you think you’ll be in a year? Five years? Twenty years? 

One of the big problems with setting goals, especially financial ones, is that we’re really bad at imagining our future selves. Just 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. 

When we talk about financial goals, we’re often talking about long timeframes. 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! 

We do the same thing with our children. When my first daughter was born, college was the last thing on my mind. But by the time we had our fourth child, I had a good idea how fast 18 years would go by. 

When we start talking about our distant future selves, it’s easy to rationalize the decision to not do anything. In fact, our future selves can actually often feel like some other annoying person constantly stealing heaps of fun from our current selves. 

And yet, while our future selves 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. 

So what’s the solution? 

To start with, we need to get really clear on our goals. And I’m talking broadly. You don’t have to know exactly what college your first-grader is going to go to and exactly what the tuition is going to be. Just don’t pretend that 18 is a long way off. It’s not. So you better start saving now. 

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 selves will be here faster than we think. Remember all the stupid stuff you did as a teenager? Don’t be the 60-year-old that wants to hit your 30-something self over the head for doing stupid adult stuff, like not getting clear on your financial goals.

-Carl

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

Back when I lived in Las Vegas, 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. Here’s how it works:

1- You make a small improvement. 
2- That becomes the new normal, and you get used to it. 
3- You make a small improvement again.
4- That becomes the new normal again. 
5- Repeat. 

The result of incremental change is that we barely 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.

Of course, this doesn’t just apply to riding bikes. I specifically recall one time when I was working remotely for a large company. I got very little feedback on my work and was largely left alone. I loved the independence, but I also struggled because I had no idea if what I was doing was valued by the people I worked for. I wondered if I was achieving anything at all.

To deal with this struggle, I started reviewing each week and noting what I had done. It felt weird at first because I didn’t want it to be seen as taking credit for things, but as the weeks added up and the list got longer, it felt good. I was doing stuff, and that stuff was making a difference, for sure.

No one else needed to see the list. It still felt good. It helped me see in real-time how incremental changes add up.

If you build a process of reflecting every month, quarter, and year, you’ll never feel like you’re not accomplishing anything again. And while that may spoil some of the surprise of suddenly and unexpectedly arriving at your goal one day, I promise it will be worth it to feel much better along the way. 

-Carl

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

Can you do me a favor?

Please list for me your financial goals.

Go ahead, I’ll wait…

Okay, stop. 

Did you feel that?

Even I can feel it. 

And what I feel when somebody tells me to list my financial goals is weight on my shoulders. I can feel tension in my neck. I can feel this emotion bubbling up in me, saying: “I don’t know!”

Well, guess what, if you felt that too, you are not alone.

I have asked hundreds, if not thousands, of people about their “goals,” and almost universally, the question seems to generate emotional weight. For many, it’s literally roll-your-eyes dread. “Not this again…” they say.

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.
As the self-declared King of Permission Granting, I’m granting you permission to relax when it comes to goals. Just guess! No one knows exactly what you’re going to be doing 17.5 years from now—so there is 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. Don’t change your goal just because it turns out to be harder than you thought to reach it. But you can change it if it no longer represents what you think you want to do. Remember, it was a guess.

3- Goals are yours.
Not your neighbor’s or Instagram’s. Yours. And since they are yours… you don’t have to worry about them being wrong! The only goals that are right for you are your goals.

4- Think big goals and micro-actions.
Having a big, scary goal gets you out of bed. Repeatedly taking the next smallest step keeps you moving.

Please, keep this in mind because I guarantee I won’t be the last person to ask you to list your financial goals. 

-Carl

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

Correct me if I’m wrong: There’s something you’ve been working on, right?

It’s something you’ve always dreamed of. Something you’re super excited about. And it’s so close! It’s the business you’re about to launch. The novel in final edits. The podcast you’re about to release… as soon as the time is right.

Can I just ask you something?

What’s stopping you from putting this thing into the world?

I have a hunch I know the answer to that question. But I’m warning you, you might not like it.

The reason this thing is still a secret is… you’re scared.

That’s right, the reason is fear.

Now, that can be difficult to see sometimes because we’ll do anything to avoid facing our fears. Instead of facing fear, we dress it up in disguises.

What color should the logo be?

I’m not sure what font to use.

I can’t find an agent.

Let me be clear about something. That last item on the checklist before you launch… that’s not work, that’s fear dressed up as work. It’s a convenient excuse allowing you to keep putting off facing your fears.

Look, I’m not talking about first drafts here. The hang-ups that keep you from starting a project are a different subject altogether. I’m talking about you being so close to the finish line you can taste it. And yet, you don’t take that final step and launch.

I have news for you: What is holding you up isn’t the size of your font—it’s the size of your fear.

Do me a favor. Go grab a piece of paper and pen, and do the following:

1- On the left-hand side of the page, draw a box and label it “The Thing I Want to Do.”
2- On the right-hand side, draw another box and label it “Actually Doing It.”
3- In the middle, between “The Thing I Want to Do” and “Actually Doing It,” make a list of everything that is standing in your way.
4- Draw a big box around that list and label it “Roadblocks.”
5- Next, grab a Sharpie and put a big fat line through “Roadblocks.” Above it, in all caps, write “Places to Hide.”

I want you to take that piece of paper and pin it up somewhere you’re bound to see it often. This is your daily reminder of the real reason you’re not doing that thing you want to do.

Our own work, when we are judging it ourselves, is never finished or good enough. I have a secret for you: it’s not because we are perfectionists. It’s because we are scared. Scared nobody will like it, scared it won’t work out, scared of being embarrassed.

The way we deal with that fear is by picking a roadblock and hiding behind it. Isn’t that funny? Just like when we were children, and we hid under the blankets from the monster in the closet.

Let me be super clear: being scared is not the problem. Being scared is human, normal, and totally okay. The problem is when our fears prevent us from making the quantum leap between “The Thing I Want To Do” and “Actually Doing It.”

Once we understand why we are perpetually stuck at 90 percent, we can make major strides toward 100 percent. It’s no longer about any specific roadblock. Now it’s about, “How do I work with fear?”

That is a much better question than, “What font should I use?” and it’s one that is much more interesting.

-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.