Setting goals is one thing, achieving them can be quite another. Which is why setting the right kind of goals can really matter.
We sat down with Simon Russell at Behavioural Finance Australia to talk about how our goals can help us achieve what we want in life, and make us happy at the same time.
Q. Simon, happiness is something that most of us strive for. What have you found to be some of the key learnings from your research into happiness, and how we spend our money?
Happiness and money very often go hand in hand. As humans, we spend money to buy things we think will lead to happiness. But often, we can mispredict what will make us happy, how happy it will make us, and how long that happiness will last. In other words, we may spend money on things that might make us happy momentarily (eg. a new car), without accounting for the fact that once something loses its novelty and we take our attention away from it, that happiness tends to fade away.
This is one of the reasons why positive experiences have been found to trump material items as a path to happiness. Whereas material items largely remain the same, experiences can continue to attract our attention, especially when we break them up into bite-sized chunks, such as, taking two shorter holidays instead of one longer holiday.
But perhaps one of the most interesting pieces of research I’ve found is about trading money for time. A study by Assistant Professor Ashley Whillans1 found that people who feel time-poor, experience lower levels of happiness and higher levels of anxiety, depression and stress. They experience less joy, and laugh less too. Whillans believes that spending time to get money is backwards. Instead she suggests that the happiest people use their money to buy time, such as hiring help for household chores, or paying for more convenient transport that cuts out travel time.
Q. When it comes to setting goals, what’s the secret sauce to setting goals that can lead to greater happiness?
As humans, we are motivated by much more than money. It’s why we often find it so hard to stick to goals that have no real meaning or purpose behind them. It’s useful to think of your goals as the next unwritten chapter of your life. When setting any kind of goal, it’s important to really take the time to think about the type of happiness you value most, the possible trade-offs between your income and happiness, your spending priorities, life narrative and your sense of purpose.
Some people find their purpose in employment. Some people find their purpose in helping others. Others, in achieving difficult, effortful goals. Having this purpose can often keep people doing things that are difficult, but rewarding.
But goals also need to motivate action. While setting goals that are too hard can lead to higher outcomes, they have a greater risk of failure. Ideally, goals should balance being challenging and aspirational, with being reasonably achievable. And they also need to be broken into bite-sized actions. As they say, the journey of a thousand miles begins with a single step. While the ultimate goal might be large and difficult, each step can be specific, simple and easy. Focusing on the end goal can create inspiration, while focusing on each step is what makes it happen.
Just as important, is to make sure that your actions can control whether or not you achieve your goal. There is nothing more deflating than doing your absolute best, but failing because of some external circumstance.
Q. It’s commonly said that goals need to be specific and measurable, in order to be effective. But you talk about ‘fuzzy goals’ and ‘flexible goals’. What do you mean by this and when might setting these goals make sense?
Often, we go through major life transitions that shift our desires and priorities. For example, a 20-something with no children who desires a sports car, might become a 30-something parent shopping for a 7-seater. And similarly, the relaxing unstructured free time that is so highly valued by a full-time employee might become isolating for someone who has recently retired.
Or, we may be going through a period of time where the crystal ball through which we view the future is more opaque than we’d like it to be. In these scenarios, setting fuzzy or flexible goals can be useful. Fuzzy goals are specified at a high level, and are imprecise and flexible as to the specific details, such as timing. The less precise the forecast, the more likely it will be right. Fuzzy goals stand a better chance of remaining relevant in the context of a changing reality.
Flexible goals have other benefits too. For example, having a flexible target retirement date or flexible holiday plans might allow someone to absorb additional investment risk. When markets inevitably fall, it matters less in terms of its impact on achieving the goal if these goals can be satisfied at different times, in different amounts or in different ways.
If you’re going through any major change in your life, consider setting fuzzy or flexible goals paired with more concrete short-term actions to achieve them.
Q. Before we wrap up, is there anything else you’d like to share with our readers?
As we’ve covered, goals can change over time. What may have made sense for our lives a year or two ago, may not make sense now. Once we’ve placed a hand on our heart and declared a particular goal to be important, changing course might feel uncomfortable.
But the reality is, things change, and as they do, our goals may need to change too. As Nobel Prize Winning economist Dr Paul Samelson reportedly said, “when events change, I change my mind. What do you do?”