This is a guest post by Robert, who lives in Calgary and worked as a financial adviser before retiring at age 35. He is married, has three kids and has returned to school with the goal of eventually living and working overseas.
I enjoy swimming regularly at the local pool. In between laps, when I stop to rest and catch my breath, I often watch other swimmers. I have noticed that there are two main approaches that people appear to use. There are swimmers who are there for fun, who do what they feel like and are there to have fun. There are others who either bring a swim plan or use the clock to push themselves and who appear to push themselves. I don’t push myself every single time I go swimming, but I don’t expect to become a better swimmer unless I’m working toward a goal.
Having a goal, either for distance or for speed, requires that I push myself and stretch to reach my potential. I have found that my goals must be measurable, be under my control and be believable. Eventually, I’d like to be able to swim 500m in 8:00. That’s measurable, because I can swim 500m and time how long it takes me. Today it took 11:00, so 8:00 is not really realistic. I’m not entirely sure what it will take to be able to swim that fast. That’s why my present goal is not to swim 500m in 8:00. Instead, my goal is to be able to swim six 100m intervals on 2:00. It may only be a step toward my long-term goal, but it’s within my ability and it’s believable, so I don’t get discouraged by a goal that’s too far beyond my reach. With this smaller, nearer goal, I’m committed to doing what it takes to achieve it, and I have fun working toward it.
Each session, I record my result. Each week, I expect to make some small progress. If I never tracked my speed, I wouldn’t know whether or not I’m making any progress, and I’d really just be swimming for fun. My goal would end up being just a wish. But as I see slow increases, I feel the positive effects of pride in my accomplishments. Every month, I also have a week of reduced exercise to allow my body to rest and recover. How would these ideas apply to personal finance?
First, it’s essential to set a goal. If the goal is a big, faraway goal like retirement, it should be broken down into a series of more manageable and nearer goals. As a financial advisor, I broke down the retirement goal into annual target amounts. To focus on what’s in a person’s control, it makes sense to set savings targets, and accept market growth as a bonus (when it occurs). When a person can see that they are meeting their targets, they can feel comfortable that they are making progress and doing what’s needed. They can also motivate themselves to save their target amount by seeing the progress toward their ultimate goal of retirement.
And there’s nothing wrong with taking a month off to go on vacation or buy something you really want. We can’t sacrifice all the time without eventually wearing down. After all, the journey is meant to be enjoyable. How do you ensure that you’re making progress with your finances?