Eric Roberge
Eric Roberge, CFP.
- Eric Roberge is a Boston-based financial planner.
- He finds the worst financial goals he hears from his clients are generally along the lines of earning, saving, or having "more money."
- The problem with that type of goal, he writes, is that it's so unspecific that it's not clearly actionable or measurable, and it's hard to tell when you've achieved it.
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If you've read anything about personal or career development, you've likely heard of "SMART" goals before.
The acronym provides a structure for setting better goals that you can actually achieve, by keeping them Specific, Measurable, Actionable, Realistic, and Time-bound (meaning they have a deadline).
But as is the case with most structures or systems, hearing about them in theory is very different than putting them into practice.
This could explain why most people set a really terrible financial goal that sets them up for failure instead of success.
If your goal is to have 'more money,' then you might have a problem
The worst financial goal most people set is something along the lines of "more money." When I ask people about their goals, they usually say some variation of this.
Maybe you want to earn more money. Or you want to save more money. Or you want to invest more money and get a higher return on those investments.
Whatever it is, people tend to state their financial goals in terms of wanting more… but they don't clarify anything past that.
This certainly isn't a SMART goal for a number of reasons. It's not specific and it's not measurable, and because it's neither of those things it's not actionable, realistic, or time-bound either!
The biggest problem with setting "more money" as a type of goal you want to pursue is that when you want more, then it becomes difficult to define what enough is. And that can be the root cause of a lot of unhappiness around your finances.
Why our brains aren't wired to achieve a goal like 'earn and save more money'
There are a number of things that happen when you set goals like "save more" or "earn more" money without making them specific based off what enough money looks like.
The most difficult to deal with might be the fact that our brains are wired to adapt very quickly to our day-to-day surroundings, routines, and lives.
When it comes to how we feel and what we want, this phenomenon is often referred to as hedonic adaptation. This is the idea that no matter how amazing or terrible we may feel, we tend to have an average emotional state to which we return.
You can look at this as both a good and a bad thing. It means that even after suffering a severe setback or plans that didn't go right, your emotions will return to how you felt before things went wrong - and that will probably happen quicker than you'd expect.
But it also means that when things go well, we get used to that very quickly. What's new and novel becomes normal. Excitement fades and complacency takes its place. (And again, that probably happens faster than you think it will!).
So when you earn a raise, it's going to feel great at first. But by the third or fourth paycheck, it's just your new pay. You adapt to the new normal … and then you go back to wanting "more" again.
Or maybe you manage to increase your savings. You'll feel very proud and accomplished at first… and then you'll start taking it for granted and start asking "why can't I save more?" soon after.
When the goal is just "more" and there's no point you can identify as "enough," you get caught in this never-ending cycle of quickly adapting to the new norm. It can leave feeling like you're right back where you started (even if you've made progress) because the goalpost is constantly moving forward toward more.
How can you set better financial goals that are more meaningful and useful to you, if more isn't the answer?
Tips to determine how much is enough, and how to set better financial goals
The very first thing that will help you set better financial goals is making them specific and definitive. You need to know how much is enough to do what you want to do in your life.
This is easier to do when it comes to one-time purchases, like buying a home. You can look at the purchase prices of various properties to know how much you need to save in order to make a down payment.
The trickier part is knowing how much house is enough - or if you even really want a house at all, or you simply feel pressured to buying because everyone else is - and identifying the point at which more or bigger is not going to make you happier.
I've found that identifying "enough" for me when it comes to things like houses, or cars, or other traditional status symbols, is easier to do when I'm clear on what I value.
When I understand what's important to me, it's easier to walk away from things that don't align with those values and instead focus on what I care about.
Defining enough becomes harder when you start talking about less tangible things, or items that don't come with specific price tags … like knowing how much is enough to retire when you want, or how much you'll need to fund your lifestyle today without sacrificing future financial security.
That doesn't mean it's impossible. Working with a financial planner who can use software and specific tech tools to run complex projections for you is a good way to get an exact number for what your enough is, but it's not required to get yourself in the ballpark.
Try this to start defining what success actually looks like for you in specific and measurable terms:
Think about what your ideal life looks like, now and in the future
Use your imagination here and picture what your dream life looks like. Where do you live and what kind of work do you enjoy (or do you not work and spend time volunteering or engaging in other pursuits instead)?
Do you have any specific hobbies? Are there skills you work to improve? How do you spend your day-to-day life?
Spend some time daydreaming and take notes on what stands out most. But be careful here: The first answers that might jump to mind are things like "a new Audi" or "a 3,000-square-foot home" in a trendy neighborhood.
These things are nice to have … but will they really make you happier than other (less expensive) options? Remember, we adjust to the new and novel extremely quickly. That's a big reason we tend to regret the money we spend on material stuff.
When you think about your ideal life, focus more on what tends to make people truly happy: experiences, control over how they spend their time, and quality of relationships.
Another way to daydream in the right direction is to get clear on your values and what's most important to you, and think about what that looks like in practice. For example, if Family is extremely important then your ideal life might include more time spent with your family members (not necessarily more time spent in your luxury car).
Tally up your costs and choose starting points
Look at what you wrote down as some of the highlights in your ideal life. From there, start estimating how much those things cost.
Here are some examples of potential priorities:
- Traveling to new countries
- Being active and being outside
- Starting your own business
- Getting married or paying for a child's college education costs
- Having freedom to spend time with family and friends now
- Creating the ability to enjoy financial security in the future
Once you identify what's important, start assigning costs to these items. You might need to do a little planning or researching here to determine how much you need. What kind of traveling you want to do, for example, will dramatically impact how much your costs will be.
Those costs give you a starting point for what "enough" is. That doesn't mean any of this is set in stone. You may find you actually need more money to fund and achieve your goal, or you could need less.
You just need to identify something specific as a place to start - but then be proactive as you go. Check in with your priorities, assumptions, and estimates about "enough" periodically, and adjust as things change or you have more information.
Get clear on your purpose, and get in action
One of the biggest problems with the idea of having "more money" as a goal is that it's a bit meaningless. But now, with more specific and tangible ideas of what you want and an educated guess on what those things cost, you have more substance to work with.
The more clearly you can define why you want something or why a specific priority or goal is important to you, the easier it will be to do the work necessary to achieve or enjoy it.
Understanding why provides a lot of motivation to get in action, and keep moving forward. That being said, acknowledge your progress along the way and celebrate milestones or small accomplishments leading up to the ultimate goal.
If you can get clear on what you want and set specific numbers around those things, you'll find it's easier to make a plan of action to get from where you are now to where you ideally want to be.
It's hard to know what to do to get "more." It's much more realistic to identify a specific point you want to reach and work backward from there to choose specific actions to take to reach your goal.
Eric Roberge, CFP, is the founder of Beyond Your Hammock and the host of the Beyond Finances podcast.
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