Executive Summary
It is viewed as almost common wisdom: the key to success is to set clear goals so that you can achieve them. After all, if you don't know what your goals are, you can't determine the path to reach them. Financial planning itself is rooted deeply in this philosophy, given its significant emphasis on goals (whether for retirement, college, legacy, or something else) as a foundational step in the financial planning process. Yet as I reflect on my own financial and business success over the past decade, I am struck by a startling realization: not only did I not set any goals for myself, but I'm quite certain that if I had, I would be less successful today. Because it's not about goals, really. It's about habits.
Today's blog post is inspired by a recent conversation I had about financial and business success, and what it takes to succeed. The discussion initially revolved around the classic wisdom of the importance of setting goals and the role it plays in the financial planning process. Yet as I reflected on my own experience, I realized that all of my success stems not from setting goals, but instead from establishing good habits.
Perhaps some examples might help. As many of you know, I am a bit of a learning junkie, with an almost literal "alphabet soup" of letters after my name signifying more than half a dozen different designations and two Master's degrees. Because of this, I'm often asked "how many I'm going for" or "why I set a goal to get so many." Yet the answer is very simple; I don't have any such goals. I have a habit of making myself learn something new, every day. It turns out that when I repeat this habit, day after day and year after year, but enrolling in programs that structure and facilitate my learning, I end out with a whole bunch of designations. But the goal was not designations. I just made learning a habit. The designations and degrees are what I accomplished while I was on the journey.
I find this similarly true in the financial realm. I have been relatively successful at generating savings for my retirement and other goals, yet most of my savings has not been driven by my goals, per se. Notwithstanding my work as a financial planner, I have not sat down and set a retirement goal for a certain standard of living, done the math, determined the required savings amount, and then set my savings level at that target. I've simply made it a habit to live modestly, spend far less than I earn, not overspend on where I live and what I drive, and I have money left at the end of the month that gets saved. Ironically - yet perhaps, this is the point - as a percentage of my income/salary, this actually leads me to save more than I probably would have if I just targeted a retirement savings goal.
And perhaps my tendency to not set goals is best reflected in my business activity. Seven years ago, I had never given a speech on a podium, and had never published anything I'd written. Now my primary income is from professional speaking at conferences, and paid subscriptions to my newsletter, in addition to the work that I do for Pinnacle Advisory Group, New Planner Recruiting, and more. If you had asked me then to set a goal about what I'd be doing at the turn of the decade, speaking and writing would not have even made the list. In fact, if you had asked me just 4-5 years ago as this activity was starting for me, how much I would be writing, how many speeches I'd be giving, how many conferences I'd be attending, and what my business would be earning for all of this activity, there is no way that I would have predicted the extent to which the business has grown. In other words, if I had set a goal, the goal would have been lower than what I could achieve, and if I had in fact set that goal, I would have likely "relaxed" once the goal had been reached, and today I'd actually have a less profitable and successful business. Instead, I didn't set goals; once again, I just tried to establish good habits, of speaking to the media often, of publishing on a regular basis, of developing new content as much as I can, and I've let the journey take me where it will.
Does that mean we should never set goals, and just let the journey take us where it will? Not exactly. I do still think there can be some value in establishing goals... with an important caveat. Don't let the goal BE the end point. The purpose of setting a goal is to determine what habits you must establish that will lead to success. Ultimately, though, it's the habits that actually bring about the success, and once you're on a journey supported by the right habits, goals just limit the outcome.
And again, I find this is as relevant to many aspects of financial planning, as it is to the business and personal life. Setting a goal for savings should be as much about having good financial habits - like proper use of credit and debt, living with a modest home and car, and spending less than you earn - as it is actually doing the math to determine what monthly amount you must save in order to retire 10, 20, or 30+ years from now. It's hard to be motivated by immediate savings for far distant goals, especially when there's so much uncertainty in the path that it's hard to be entirely accurate anyway. It's much easier to feel rewarded for engaging in good habits that you know will support long-term success and leave you better prepared to deal with an ever-changing journey.
So what do you think? Is goal-setting really a critical step to success? Or is goal-setting just about determining the habits you need to follow to get on the right path? Am I just "strange" that setting habits works better than setting goals? Does this seem relevant for any of yours clients, or perhaps some clients more than others?
