Goal Setting…Don’t Make This Mistake

shutterstock_158376401 (2)Every year, we celebrate the New Year with fireworks, champagne, and parties, immediately followed resolutions and goal setting for the year ahead.

Before you set your goals for 2015, take a moment to recognize the success you had in 2014. Too often in life we get so focused on where we want to go in the future, that we fail to see how far we’ve come.

In December, I attended a session with Strategic Coach in Chicago. The purpose of the coaching program is to help financial advisors, small business owners, and other entrepreneurs manage their businesses more effectively.

One of the concepts we discussed was measuring progress towards your goals and “avoiding the gap”. As a financial planner, I help clients define their goals and develop a plan to help make them reality. A big part of the ongoing financial planning process is measuring progress towards your goals.

The problem is that too often we compare where we are right now to some ideal standard in the future, an ideal standard that you can never realize because it keeps moving farther out the closer you get to it. Newer, bigger, more ambitious goals replace old goals as fast as you meet them. Like walking towards the horizon, you never really get to your ideal standard. In the process, you forget how far you have come.

Instead of comparing where you are now to an ideal, future standard, perhaps a better strategy might be to compare where you are now to where you were when you started.

Here’s what I mean…

For many, the ultimate goal of investing is to accumulate as much wealth as possible, preferably as soon as possible.

We seek an ideal standard in life where money is no object, our returns are always positive, and we never worry about money. In this ideal standard you aren’t trying to keep up with the Joneses. The Joneses are trying to keep up with you!

Unfortunately, the ideal standard I just described exists only in your mind. Whatever ideal you have in mind today will be replaced by an even more ideal standard in the future as you near your goals. By not fully meeting your ideal standard you may feel disappointed, unsatisfied, and frustrated.

Your neighbor earned better returns on his investment than you did. The lady in the cube next to you has a friend whose sister bought Google before it was even Google. And your college roommate who retired at 40 now lives on a private island in the Maldives! By comparison, your life stinks. Or, at least you feel that way sometimes.

I fall into this trap all the time. If I run a half marathon, I curse the old lady in the pink tutu who finished ahead of me (that really happened). If I reach a new level in my career, I wonder why it took so long. If I lose a few pounds, I whine that my abs still don’t look like those of the 20-year-old on the Fruit of the Loom package. When I meet my goals, I never feel satisfaction because the ideal standard I have in my head is still a long, long ways off.

Takeaway

Here is the key takeaway from the coaching session that I want to share with you: DON’T DO THAT!

Instead, measure your progress by comparing where you are today to where you were in the past, and how your progress is helping you get closer to whatever financial goals matter most to you – financial independence, preservation of wealth, lifetime retirement income.

Maybe you came from humble beginnings. How much money was in your 401(k) in 1995? 2005? Even 2010? Probably, a lot less than now. Despite a dismal stock market from 2000 to 2009, and an economy that’s been described as the “Great Recession” and “the worst since the Great Depression” you have done pretty well. Admit it.

Perhaps you overcame significant obstacles on your way to where you are today. Divorce. Death of a spouse. Job loss. Business failure. Poor health. Market crashes. Economic malaise. You’ve overcome a lot to get to where you are today. Don’t discount it by comparing where you are today to where you want to be in your ideal, perfect, future world. You will get there eventually, or at least get a lot closer than you are today.

I am all for setting bold goals and aspiring to an ideal standard. That’s still important. But part of being successful includes recognizing your victories and accomplishments along the way.

It’s the same with your financial goals. You’ve maxed out your 401(k), reduced debt, put your kids through college. Congratulations! Those are huge accomplishments. You have met or have made major progress towards some really important financial and personal goals.

What successes did you have last year? How about over the last five or ten years? Take a moment to recognize your progress and give yourself a pat on the back for a job well done – maybe even celebrate a little – you’ve earned it.