Setting goals is one thing; achieving them can be quite another
As such, 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 hearts 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?
This report is prepared by Bridges Financial Services Pty Limited ABN 60 003 474 977 AFSL 240837 (Bridges). Bridges is an ASX Market Participant and part of the IOOF group of companies. This report is prepared by the IOOF Research team for: Bridges Financial Services Pty Limited ABN 60 003 474 977 AFSL 240837, Consultum Financial Advisers Pty Ltd ABN 65 006 373 995 AFSL 230323, Elders Financial Planning ABN 48 007 997 186 AFSL 224645, Financial Services Partners ABN 15 089 512 587 AFSL 237 590, Millennium3 Financial Services Pty Ltd ABN 61 094 529 987 AFSL 244252, RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429, Shadforth Financial Group Ltd ABN 27 127 508 472 AFSL 318613 (‘Advice Licensees’). The Advice Licensees are part of the IOOF group comprising IOOF Holdings ABN 49 100 103 722 and its related bodies corporate (IOOF group). The Advice Licensees and/or their associated entities, directors and/or employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this document or may provide services to the company referred to in this report. The document is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of the Advice Licensees. The Advice Licensees and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. The document is current as at the date of issue but may be superseded by future publications. You can confirm the currency of this document by checking the intranet site (links below). The information contained in this report is for the sole use of advisers and clients of AFSL entities authorised by the Advice Licensees. This report may be used on the express condition that you have obtained a copy of the Advice Licensees Financial Services Guide (FSG) from their respective website. Disclaimer: The information in this report is general advice only and does not take into account the financial circumstances, needs and objectives of any particular investor. Before acting on the advice contained in this document, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before making a decision to acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance. The contents of this report should not be disclosed, in whole or in part, to any other party without the prior consent of the IOOF Research Team and Advice Licensees. To the extent permitted by the law, the IOOF Research team and Advice Licensees and their associated entities are not liable for any loss or damage arising from, or in relation to, the contents of this report. For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.
1 Whillans, A, 2019. “Time for happiness: why the pursuit of money isn’t bringing you happiness – and what will”. Harvard Business Review.
The information contained in this article represents the views and opinions of Simon Russell, who is not affiliated, associated, authorised, or endorsed by us. In addition, this information is intended for educational purposes only, and does not take into account your objectives, financial situation and needs. For further information or clarity on anything that has been discussed in this article, please consider seeking qualified and professional advice.