In the first three episodes, we discussed what goes into designing a “Good Life”. Financial planning is meant to support achieving that big picture objective. The “Good Life” will look a little different for everyone and we all must plot our own course. We also described some of the ways that we can be blown off course and principles that we can use to better navigate through the day-to-day decisions we make.
In this episode, we zoom back out to plotting our course again. Not as the abstract destination, like in episode one. Rather how to concretely move our financial ship along the way. How to set concrete goals as waypoints and targets to motivate you in working towards them. Plus, strategies to weigh competing goals when the currents are pushing you in different directions.
One very common goal is financial independence (FI). Financial independence is not only a major financial goal and objective in financial planning. It is also a powerful tool to recognize and use. Like the engine of your ship. You can plot the course, but FI helps you to move forward and even power into new directions. So, take your seat at the helm and join us for Episode 4 of The Money Scope.
Transcript
Introduction
[0:00:03] BF: Welcome to the Money Scope Podcast, shining a light deep inside personal finance for Canadian professionals. We are hosted by me, Benjamin Felix, Portfolio Manager and Head of Research at PWL Capital, and Dr. Mark Soth, aka The Looney Doctor.
[0:00:17] MS: Great. Welcome. And in our last episode, we discussed principles to use in guiding your decision-making around prioritizing. How to spend your time and money most effectively. We tried to include some practical strategies that you can use on a day-to-day basis such as decision policies. Trying to bundle the good stuff. Leaning into regret as a powerful emotion that can help us. And we peppered that with some examples from our lives.
That sets the scene for this episode. And in this episode, we’re going to probe a bit deeper into some longer-range strategies. We’re going to talk a bit about financial independence, which is often a major financial goal and also a powerful tool that we can use. And we’re going to use some strategies to figure out what our values are and how to express them with purposeful and effective goal-setting. That’s really vital if you want to achieve things like financial independence or any other outcome that you’re looking for.
[0:01:08] BF: All right. I think we’ve identified our goals for this procedure. And we’ve got everything ready to go with the money scope.
Financial Independence
I’m going to start by talking about what financial independence is, which is a big goal that we’ll dig more into. The big thing is that the most explicitly finite resource that people have is their time. Money is scarce. We all know that. Everyone has to work hard to get money. But theoretically, money can be accumulated without any limit. I mean, we see billionaires. You can’t accumulate time in the same way. Time is finite for everybody no matter how much money you have.
Now high-income households and skilled professionals improve their financial position through conscientious earning spending and saving decisions. And by spending wisely in line with things that you value, high earners can live the good life while working toward being in a financial position where they no longer have to trade their time for money at work. And that’s what we call financial independence.
Financial Independence Variables
Financial independence is when your investment income can reliably cover your cost of living or where you don’t have to trade time for money to live. When you dig into what that really means, at the core of it, the factors that play into financial independence are going to be how much you spend, which is a big, big driver. Your sources of income. What income do you have to cover your spending? And how much you pay in fees and taxes related to that income.
It’s really what is your net income, and how much do you spend and how do those things match up? When your income is able to cover your expenses without you having to work for it, you’re financially independent.
Another factor at play there is going to be your age and your life expectancy. If you have two years left to live, you obviously don’t need as much money as somebody who has 50 years left to live at least in terms of expectations.
Now most income streams, even a passive one like a financial asset where you don’t have to go into work to earn income from it, the income is still not guaranteed. Even though we’re saying financially independent, you still have to account for being able to be flexible in your spending because the income sources are not guaranteed. Potentially being able to turn your human capital back on to earn income by working if needed.
And the other big thing, and we’ll talk about withdrawal rates, is creating enough of a buffer with your financial assets. So that if you get worse returns than expected, you’re still able to fund your spending.
[0:03:37] MS: I think with all of those variables, really, financial independence is not so much a static milestone. It may change as any of those variables change. So, people focus on the investment piece. But the spending part is actually important as well as is the time frame.
For example, we probably cut about five to ten years off of our time to financial independence by cutting a lot of our fixed housing costs. And we didn’t really change our portfolio size to do that. We just cut some of our fixed costs. That changes the math.
And the other thing to remember too is every year that you get older while you’re working also lowers the bar a bit too. If you have a shorter life span to fund, then you don’t need as much money.
[0:04:12] BF: Yeah. It’s super interesting to think about. I mean, that part’s kind of morbid. But that’s kind of the balance, right? How much you sacrifice your future financial independence today while using your money to your advantage in the present?
But I love that you reducing your expenses, there’s kind of this equilibrium of financial independence where your financial assets are on one side and your expenses on the other side. And you can adjust that equilibrium by changing your expenses. If your expenses go up a whole bunch, all of a sudden you need that much more in financial assets to be financially dependent. But the other thing is also true, where if you can reduce your expenses a whole bunch, like changing your housing situation in your example, all of a sudden, the amount in financial assets drops pretty dramatically pretty quickly needed to fund financial independence.
[0:04:50] MS: Yeah. And that’s why when we’re talking about the financial assets, it’s the liquid ones that you’re either willing to sell and use or stuff that’s already sort of a liquid asset. That’s why your principal residence generally doesn’t count unless you’re actually going to downsize it. And at that point, it counts when you do it, not beforehand. Because you don’t know what’s going to happen with that. People have all sorts of plans that go off course.
I think the other part of it is to think about financial independence in degrees. Because you’re trying to make this trade-off over time and it’s not really some discrete event in the future, it’s something that happens gradually. Full financial independence means that you don’t have to work for money at all. But it can also be useful to think of that in partial terms as well. That way you can adjust course as you go.
For example, you may not have enough money to retire, but you could have enough money to work part-time. Or you could work in a lower-paying job that you love. Whether that’s within your career or something totally different. And that’s sometimes called Barista FIRE (Financial Independence, Retire Early). That’s a common term used in the US where baristas may have benefits, which is having health benefits is a pretty big deal down there.
You may also hit a point where you can continue working full-time in your high-income job, whatever that is. But as we’ve talked about before, there’s a lot of flexibility there and you may decide to drop some of the extra shifts, or spend a bit more money, or save a bit less moving forward. You basically front-load your investing and then you can coast along and take advantage of a long compounding period. And that’s termed Coast FIRE (Coast Financial Independence and Retire Early).
And there are all sorts of different flavours of financial independence with catchy names that go with them. But really the big thing is to set those goals and know what you’re working towards. And when you set a goal like financial independence, it’s important to recognize when you’ve achieved it so that you can actually use that to your advantage. But you also need to have some numbers to measure that so that you know when you’re there and how you’re progressing along.
Ben, you spent some serious time dissecting some of the common rules of thumb for financial independence numbers.
[0:06:36] BF: What you’re just talking about is super important. All these different flavours of financial independence. And this is why we’re leading this topic. It’s really about figuring out what your values are and figuring out what the life that you want to live looks like. And then being intentional about spending and saving to achieve that.
On our Rational Reminder podcast, we used to be really hard on FIRE as a concept because we were always like, “Well, why would you want to stop working?” Because people can get a lot out of work. And then we talked to a guy who’s part of the FIRE movement. He made a popular documentary about it. We had him on our podcast. And he really drove that point home, that it’s not about never wanting to work again. It’s about figuring out what your values are and not spending on stuff that’s not aligned with your values. That’s effectively what we’re talking about here.
And of course, having financial assets to offset your need to work gives you a lot more room in your life to express your values. But I think that concept that there are different flavours of what we’re talking about is really important.
[0:07:27] MS: Yeah, it’s great that you mentioned that. Because I can tell you that your tastes change over time with those flavours too. The way I looked at it when I started out and the way that I look at it now is completely different.
Measuring Financial Independence (The 4% Rule?)
[0:07:36] BF: Yeah. This will come up I think throughout the whole conversation. But that’s a super important idea for people to understand. Quantifying this thing. Anyone that’s thought about FIRE or read about FIRE anywhere has heard of this. Most common rule of thumb for how much you can spend from a portfolio of financial assets is 4%. The 4% rule is synonymous with FIRE.
I think that number’s probably too high and there’s some level of subjectivity around this. But like you said, we’ve done a lot of quantitative work on it. And we’ve talked about this a ton on the Rational Reminder podcast including with a whole bunch of expert guests that have given us various perspectives on it. We’re not going to go too deep on that here. We’ll just use a bronchoscope. Not a colonoscope.
I think as opposed to 4%, a more reasonable number is probably somewhere between 2% and 3%. And I said I’m just using a bronchoscope here. But that comes from looking outside of US data, which is where the 4% rule has worked historically. When you go and look at all of the other countries, which why wouldn’t we if we’re trying to gauge expectations about the future, the number’s a lot lower than 4%. Just for the sake of argument, let’s call it 2.5%.
For an example, based on that math – and this quick math I’m going to do here is why safe withdrawal rates as a concept I think are so powerful. Based on this math, if you want to be able to sustainably spend $50,000 dollars annually from your portfolio, adjusted for inflation, you need to have about $2 million dollars invested. That 2.5% of $2 million dollars is $50,000. That’s how much you can sustainably spend from a portfolio. And that number can decrease. The amount that you need to have saved can decrease if we allow for flexibility in spending.
That’s the other thing with safe withdrawal rates, is that they’re built on the assumption that you’re going to spend the same amount every year adjusted for inflation, which I don’t think is a realistic assumption either. Using non-US data, you get a lower number. But then introducing in flexibility, you can get a higher number in terms of safe spending anyway.
At PWL Capital, in financial planning, we don’t use safe withdrawal rates for this because they’re a really good quick rule of thumb. But we’re in a fortunate, I guess you could call it position, where we have comprehensive financial planning software. So, we don’t need a quick rule of thumb. We use that software that takes into account taxes, government pensions, and the uncertainty of future returns and all that other good stuff. So, it’s more precise, I guess, than using a rule of thumb.
There are some calculators like that available online for free. Most of them are geared toward US users. But, Mark, you actually have some pretty powerful free calculators on your website. Do you want to talk about those a little bit?
[0:09:55] MS: Sure. Yeah. I spent years working on them. And as I learned more, I keep changing them. But I think they’re in a pretty good state now. The one that I’ve done that works on this I call the decumulator. Said kind of like the Terminator. It’s to draw down and decumulate your assets over time.
And I think what you’ve mentioned, the two big ways of assessing how financially independent you are is important. There’s a safe withdrawal method, which is really good for targeting a portfolio size. It’s very useful for target planning and setting targets. And it’s useful because it accounts for those variable investment returns that you talked about. We don’t make 8% in our portfolio or 5% in our portfolio every single year. It goes up and down. And that variable return introduces something called sequence risk.
And it also doesn’t account for fees and for taxes, which of course we know in Canada can drag on your returns as well. Those rules were made pre-fee and pre-tax. So, you need to account for that.
And of course, the other way of modelling is to account for those things like the detailed tax-efficient drawdown. And we have different accounts that have different tax treatment. And your software does both at the same time. It does the efficient drawdown algorithm and then it repeats it thousands of times in simulations with variable returns to try to model how it’s going to survive.
I’ve done sort of a tax-efficient drawdown, and that gives a sort of a detailed accumulation plan that’s pretty efficient and an estimated post-probate estate, post taxes, that type of thing. But it doesn’t account for those variable returns. What I did instead is I took the average drawdown tax rates from those accounts from the simulator, then you can apply that against previously published Monte Carlo simulation data. You can then translate that into a post-fee, post-tax survivability.
It’s a bit of a shortcut. But that way, I can make it run into a web browser rather than on some big server and it’s free. And all modelling is going to be imperfect. But that’s okay. It just needs to be pretty close. And I would use it for goals and motivation. Maybe a drawdown blueprint to understand what can be done. And that’s important when you discuss that with an advisor. Because they’re going to have their own software and you want to make sure that what they’re suggesting actually makes sense to what you’re thinking about as well.
The other thing is it gives like a percentage towards financial independency. I find that useful to show my spouse. Because when we want to go buy the most expensive hot tub I can find, I can show her that it’s not going to kill our retirement plans. We’re going shopping this afternoon. So, I’m going to have to update my calculator.
[0:12:09] BF: That is so important though. Just having information to make financial decisions. This stuff’s complicated. But again, on safe withdrawal rates, that’s why they’re useful. Because with a very, very simple math, you have a single number that you can use to calculate how much you would need to save or how much some current expense is going to cost you in terms of future spending. People need to have some sort of map to know how current decisions are going to affect their future.
There are a couple of really important points that you brought up that I just want to touch on a little bit more. Sequence risk and the fact that your RRSP (Registered Retirement Savings Plan), your corporation, if you have one, and your personal taxable accounts have embedded tax liabilities, you’ve got to account for those in real-life planning when you’re thinking about financial independence because you’re spending after-tax money. You can’t spend your pre-tax assets. And you go to account for uncertain returns.
Just to unpack that a little bit, sequence risk is the risk that you get unlucky and have a big market downturn when you switch from accumulation to decumulation to drawing down your portfolio. A 30% drop on your peak capital is much bigger than when it was smaller at the beginning of your investing journey.
So, it’s really like if you retire fire and then have a bunch of bad returns back-to-back all at once, it can be devastating to your ability to fund future consumption. That’s basically sequence of returns risk.
Now the 4% rule was modeled to have 95% success over 30-year periods. But as I mentioned earlier, that’s using US market data, US inflation, pre-fees and pre-taxes. And even the 2% to 3% number that I mentioned before does not account for fees or taxes. Those are just hard to account for.
On the tax stuff, if you think about the 4% rule for example, using your RRSP assets, if you draw 4% of it out of your RRSP and just say you’re at the highest tax rate or say you’re at a 50% tax rate, whatever you draw out, 50% of it goes to taxes. The 4% rule from an RRSP pre-tax is very different from the 4% rule out of like a TFSA, which is post-tax, tax-free money.
Something like the 2.5% rule, whatever it is, you can’t just look at your pre-tax assets and say, “Yeah, I can withdraw 2.5% of that.” You have to look at your post tax assets or at least take taxes into consideration when you model your drawdown.
[0:14:20] MS: Yeah. Those are really important concepts to get. We are actually going to come back to those again. We talk a bit about investing. Because it has implications there and also retirement planning, which we’re just touching upon here. So, it’s one of those things that will come back to. Don’t worry about it if your head didn’t fully get it with the first explanation. It’s going to come up again.
But it is actually practically important for this financial independent goal discussion. Because a plan with lots of fees, and taxes and sequenced risk may have a 2% safe withdrawal rate. Something that you set up with a lower cost, shorter plan, maybe 3%. That has a very big difference with how much of a portfolio you need to build.
If you’re talking a 2% versus 3% portfolio, a pre-tax portfolio at 2%, you have to have fifty times your annual spending. Whereas if it’s 3%, well, that’s 33 times. And it’s just 25 times your annual spending for the 4% rule. You may have to have double the amount of money saved and invested depending on what your withdrawal rate is.
Figuring out how to control those fees and taxes and manage the sequence risk so that you don’t have to have a super-duper small withdrawal rate could be really important for you as you set up your portfolio.
And that makes a major difference for us now, because how much you have to sacrifice now to save and invest for later is directly related to how big of a portfolio you’re going to need.
[0:15:38] BF: There’s a bias that we may have covered in a previous episode that I don’t remember if we did. But there’s a bias called the exponential growth bias. Humans are bad at thinking exponentially. We imagine exponential functions to be linear when we think about them.
When Mark says the difference between 2% and 3%, that doesn’t seem like that big of a deal. Or paying a 1% fee versus a .75% fee. That doesn’t seem like that big of a deal. But when you compound that over long periods of time, when you treat it as an exponential function as you should, the differences are material. They’re very significant. And that translates back to how much you can enjoy your time and money today. All these little details are super important.
But anyway, conceptually, with safe draw rates, whether you’re using that or a more detailed calculator, I think the general concept being that you can build towards a financial independence number. And it’s also important to continuously revisit that planning as you yourself change what you want out of your life changes, but also as your financial picture changes.
I love your example, Mark, of cutting your expenses and that creating a big change in your financial independence. And that ability to change course is huge as you work toward a major goal like financial independence. And that could be like cutting expense example. But it could also be increasing your income to change the trajectory of that path.
Now time is likely your most scarce resource. And I think that’s objectively true for everybody. I would argue that it’s even more true for high-income professionals. That may sound funny to say. But we talked about this in the past episode where high-income professionals do feel more time-stressed. And the theory behind that is that when time is more valuable because you can earn more by working, the time feels more scarce. That money time trade-off is really important. And it never gets more explicit than when we’re running through these type of long-term retirement numbers.
Using Financial Independence to Make Decisions
Financial independence terminology was popularized by this FIRE movement that I mentioned earlier. But the concept predates that by a lot. It just became this big thing that everybody wanted to blog about. In relatively recent history, retiring early, while it’s a popular theme, it doesn’t always resonate with high-income professionals and their relationship with work. Because we’ve both talked about this. We both enjoy our work. And life without work would actually be kind of sad.
Now, Mark, you’ve had a long-term relationship with financial independence. And you’ve used it as a tool in your life and it’s been present in your family for a long time. Can you talk about how FIRE has worked in your life and practice?
[0:18:09] MS: As you mentioned, this has been around for a while before it had kind of catchy new names and everyone wrote a blog about it even before the internet.
[0:18:16] BF: Yeah.
[0:18:17] MS: Saving and investing has always been about retirement. That’s often been the focus in the past. Really, it’s no surprise that the first focus for those who accelerate that process was naturally to be early retirement. And that sort of started off this FIRE movement.
Obviously, the financial independence part, I think that appeals to most people. The retirement part as you mentioned may or may not depending on how much meaning and purpose people find in their work. But I actually grew up in a FIRE family even though it didn’t have a catchy label back then. My uncle retired from engineering in his early 40s. And him and his family took up a crafting business. Basically, they raised the sheep, sheared the wool. Made that into yarn and actually made crafts with that. They had woodworking that they built from wood on their wood lot. It was almost like an off-grid kind of situation. It’s very cool.
My parents were very close with them and they ended up retiring from middle-class careers. A nurse, and my dad worked in a lab around the age of 50, which was considered to be very early for their careers. And they did that to spend time with family and volunteer in their communities kind of at their own pace.
Both those situations they went throughout of what would be called Lean FIRE, where you focus on spending control and you live a very low-cost lifestyle. Which, you know, as we’ve mentioned, that can still be the good life. We did a lot of activities together. We were active in our communities. We learned a lot about how to make and fix things, which is actually a very empowering skill to have and try to pass that on to our children. And we also didn’t miss out on anything. We were very fortunate.
My family chose to use their financial independence to redirect their time to pursuits that they felt fulfilling outside of their careers. And they did it with full retirement. But it is possible to redirect time inside of your career too. And that’s more of the approach that I think appeals to many professionals for whom our career has been a – we spend many, many years building it. And it’s a source of many positive opportunities in our lives. That’s a different way that you can use it as well.
[0:20:07] BF: Now you have actually achieved financial independence at this point. How did that milestone change things for you?
[0:20:12] MS: It’s important to recognize when it happens. And I actually didn’t really recognize until I started looking at it. My wife and I hit financial independence a few years ago. And we kind of flirted on the outskirts of it for a while until we decided to make some big changes after learning more about all the things we talked about in our first three episodes.
We did that through a combination of front-loaded low-cost tax-efficient investing. And we worked a lot at the beginning of our careers. And then we cut our costs to a more reasonable level as I mentioned. And we’ve used that to cut some of my clinical workloads. I’ve redirected more of my time to family, and looking after my personal health and spending time on this type of work, which I find quite enjoyable and I think it’s important to be done.
I’m still working full-time. It’s just that I’m doing different things. And I feel it’s got purpose and it’s stimulating and I get to meet other people and enjoy it. Those strategies that we spoke about in our first three episodes, those are actually for real. And they can be life-changing if you learn about them and actually start to apply them to your own life. That sort of predates the discussion about this.
The honest truth is when I was on the cusp of financial independence, my first thought was to retire early like my relatives did. At that point, I was feeling pretty burnt out. Medicine and healthcare could be very, very demanding. And after learning about this, I actually started to use it to redirect time in my career. And that totally changed actually my outlook on work when I was able to use it as a financial independent person.
I needed more time to recharge between weeks of ICU because it was mentally and emotionally intense. But now when I do go back to work, I really actually enjoy my weeks of service gain. And I can actually do a better job because I’m fully charged and engaged with it.
People may use this differently. Others may use their financial independence to hire an assistant within their work. They may give up some income to have someone else take on some of those less stimulating tasks which we know are related to burnout. When you’re doing less purposeful, less stimulating administrative tasks, it could be passing on some unpleasant but lucrative work. Particularly stuff that’s after hours in the middle of the night. As you get a bit older, that gets a bit more challenging.
And everyone’s career and opportunity is going to be different. There’s different ways people have to model that within their own practice, or business, or whatever profession they’ve got.
The key is though, that you need to recognize when you’re there. And if you do keep working full steam, you may decide to spend more money on other things that you can enjoy now rather than putting them off. Regardless, you have to be aware of what’s going on in your career and in your life. Where it is now and where you want it to be, and then work towards that. And that really means defining your purpose and setting objectives to get there, which is where we are going to focus the rest of this time on.
[0:22:48] BF: I hope listeners are seeing the design of how we’ve put this all together, where we really tried to talk about the contents of a good life. And now we’re talking about financial independence and how that relates to a good life. And the story you just told of your own financial independence is just a beautiful illustration of that. And now we’re going to go on to talk about setting goals in order to achieve the kind of thing that you just talked about or some other big important goal.
But it’s kind of – you need to have that framework. I mean, your explanation was just so good. You need to have that framework for what are the contents of a good life. That will affect how you choose to spend your time and money. And then you can start to plan and design your life around that to achieve some level of financial independence.
[0:23:27] MS: Yeah. I’m glad you mentioned that, because when most people think about money and financial planning, they think about investments, and they think about taxes, and they think about those numbers. And I did too.
Goal setting
Next, we’re going to get into some goal setting. We talked about financial independence. And that’s actually a very big common goal for a lot of people. But it’s also not the only goal that’s relevant to people who want to live the good life. Goal setting and objective planning, that’s one of those areas of value-add that a financial advisor can advise and help you with because it’s good to have that external set of structure there to probe you. Then how would you approach that goal setting?
Deciding Who You Want to Be
[0:24:03] BF: Like you said, I think this is an incredibly important topic. And I have a quote here from Ralph Keeney, who we mentioned in a past episode. He’s an expert in decision-making. He was a guest on Rational Reminder. I find his work to be very impactful. But listen to this quote, “Your decisions offer you the only way to purposely influence anything in your life.”1 If you think about it, that’s a big statement. But then you take a minute to reflect on it, it’s like… that’s true. You can’t control all of the outcomes because the world is noisy and random. But your decisions are the only way that you can influence any of your outcomes.
Setting goals starts with figuring out what your values are, which is what we’re going to talk about next. Followed by identifying your abstract goals. Who’s the person that you want to be? And that’s kind of like your values. And then from that, you can figure out what your abstract goals are. And we’ll talk about what abstract goals are as we go through here. And then you finally have to design measurable targets for achieving those goals. It’s kind of like three stages. Who do you want to be? What are your goals? And then what are the measurable targets towards achieving them?
[0:25:01] MS: Yeah. Values are fundamentally who you want to be. And then you have this long-term objective and short-term guide posts, which should be your targets to help you along the way. Because if you just focus on something way off in the future, you might get lost. You need something to kind of get you through the day-to-day tasks that you face and compete with those day-to-day pressures as well.
[0:25:21] BF: Day-to-day. But even – like you mentioned in your FIRE example, that you didn’t even realize you’re financially independent at first.
[0:25:27] MS: No. And we would have just had our heads down and trundled along without making changes until there was some sort of crisis that forced one.
[0:25:34] BF: You got I have the data.
[0:25:36] MS: Yeah.
[0:25:36] BF: We make decisions daily. And I remember I just mentioned how important decisions are. The effective decisions compound over time. And we talked about that with foundational regrets in one of our earlier episodes, where if you make small, bad decisions incrementally over time, all of a sudden, at some point in the future, due to compounding, there’s a big impact. And that can be health. It can be financial.
But I think to make good decisions, including financial decisions, and to get things compounding in the right direction, you’ve got to know what you value most in life. What you want to get out of life. Who you want to be as a person. The way that Ralph Keeney describes this is your strategic life values.
And I think that every decision can be evaluated through that lens of your value. It becomes a pretty powerful tool. Anytime that you’re looking at, “Should I do this? Or should I do that?” If you know what your values are, you can evaluate that decision pretty easily. If you don’t know what your values are, every decision can be stressful. And you don’t know if you’re making a good decision or not because you’ve got no framework to evaluate it through.
Now we’ve intentionally placed this topic after providing background on the good life because we thought that people would be better equipped to think through what their values are once they had that background knowledge. I mean, exactly like your FIRE example, Mark.
There’s a set of questions from Ralph Keeney’s book. And these questions are – they’re not easy to think through. And I want to emphasize that. I don’t want people to hear this once and just let it pass through or think about it for three seconds while we say what the exercise is and then forget about it. This is the kind of thing that you’ve got to come back to and spend a lot of time thinking about for it to be useful.
These exercises that we’re going to talk through in a second, they’ll help you create the set of decision values, the strategic life values that can sit at the core of managing trade-offs, and setting goals and making future decisions.
[0:27:16] MS: Yeah. So, we’ll have to timestamp this spot so people can come back to it. Because it’s one of those things that’s not going to be one and done either. It’s one of those things that you want to revisit these questions periodically because you as a person will change and your situation will change.
Questions to Reflect on Your Values
- [0:27:29] The first question is to consider activities like work or leisure that you spent significant time doing. And then ask yourself what you like and enjoy about those activities. Also, ask if there are any unintended consequences that you’d like to avoid related to them. And your answer to each of those questions may suggest something about your values.
- [0:27:53] Second question is to reflect on both some very good and some very bad decisions that you’ve made. And you can use that to help you with your values. For good decisions, recognize what values were achieved that made that decision so good. For a bad decision, recognize what values were either not achieved or that you didn’t even consider in that decision that should have been considered.
- [0:28:18] Third question, identify very good and very bad outcomes of some of your significant past decisions. For the good outcomes, identify values that were achieved. And for the bad outcomes, identify which values were negatively impacted by that.
[0:28:37] BF: All right. That’s the first three. And then I’ve got three more. You’re going to hear these right now, but this is the kind of thing that you’re going to probably want to take away and sit down with.
- [0:28:46] All right. The fourth one, imagine yourself at different ages in the future. Select about four different ages when you believe that your main concerns may be somewhat different from your concerns today. That makes me think back to what you mentioned earlier, Mark. How you’ve kind of changed over time. For each age, think hard about life values you may have then. To facilitate your thinking, you may identify friends, family or acquaintances of those ages that you respect and admire today and consider the values they likely pursue that gained your respect and admiration. I love that.
[0:29:15] MS: Yeah. That’s a good one.
[0:29:17] BF: We just recorded an episode with Hal Hirshfield for Rational Reminder. It’s the second time he’s been on as a guest. And he talks a lot about – his core area of research is about your future self and how we often feel disconnected from our future selves. But this just idea of visualizing yourself in the future is actually really powerful for improving long-term decisions. Just an additional reason why that question is really good.
- [0:29:39] The fifth one, think hard about what you might regret in the future if you had not included it in your life or had not enough time allocated to it. Review your life from today and also 20 years from now and identify any major aspects or experiences that are or will likely be missing. These thoughts should help you identify some important values. Love that too. And you see the future self in there. You also see the regret principles in there that we covered in previous episodes.
- [0:30:04] Okay, last question. Inquire about the perspectives of your family and friends. What values might each of them suggest to you? Think carefully about whether these suggested values are appropriate for you and not just values that somewhat hoped that you would have. Include them if you decide that they are your values. All right. That was six questions to reflect on to think about what your values are.
[0:30:24] MS: Yeah. There’s a lot buried in those. Those are amazing questions. Everything that we’ve built up over the first three episodes are in each of those.
[0:30:32] BF: I know. It’s so good. You can see so many of the good life principles that we talked about reflected in those questions, which is why, when I read his book, I was just like, “Wow. These are seriously thought-through questions,” which makes sense. Because Ralph Keeney, the guy who wrote that book, he’s literally the world-leading expert on decision-making.
[0:30:49] MS: Yeah. And there’s pretty serious research behind all of that too. This wasn’t just pulled out of thin air.
[0:30:55] MS: No. No. No. It’s not just him musing in his living room. Serious research went into those questions.
Turning Values into Goals
Okay. Once you’ve got your values identified using the exercises that we just talked about, which should be a very long and effortful process, setting goals and then planning to achieve them seems like it’d be straightforward. Like, “Okay, I’ve got my values. I know who I want to be. Time to set some goals.” But goal setting is not so easy. To set concrete actionable targets like saving a certain amount of money or deciding on a financial independence number, you need to know your ultimate abstract goal.
I said we’d come back to this. Here we are. How you want to spend your time in the future? That’s the abstract goal. Or the impact you want to have in your family. That’s the abstract goal. The target is how much money you need to save. The abstract goal is how you want to spend your time in that example.
Effective goals are statements of a desirable state, not the means to get there.2 That’s that abstract goal concept, where we don’t want to make the goal the means. We want to make the goal abstract. When goals are defined that way, and this is research from Ayelet Fishbach, who’s an expert in motivation and goal setting at the University of Chicago, when goals are defined that way, when they’re defined in an abstract way as opposed to as their concrete targets, they become powerful motivational tools that pull you in the direction that you want to go.
Having your values and goals explicitly articulated and documented creates, like I mentioned earlier, a useful filter for decision-making. Once you have that, once you know what your goals are, it’s really easy to look at a couple of alternatives and say, “Oh, this aligns with my goals. This does not.” If you don’t have that articulated, it’s a lot harder.
Now one of the big challenges in goal setting, I kind of laughed about this when I started talking about this topic, that it’s not so easy, is that people are really bad at identifying what their goals are. There’s studies from Ralph Keeney and others looking at the ability of decision-makers to generate self-relevant goals for consequential decisions.
Now in those studies, participants omit nearly half of the goals they later identify as personally relevant.3 And once those personally relevant but omitted goals are identified, they’re perceived as being nearly as important as the ones initially identified.
[0:32:54] MS: Really, it’s hard. And we can’t just do it easily. You have to have like a process. If you ask me what my financial goals are, I’d list them out. Then you show me other goals that I never even thought about. And I may decide those are at least as important the ones that identified on my own. I just couldn’t do it because I wasn’t thinking that way. So, you really have a problem.
[0:33:12] BF: We introduced this whole topic as all these little decisions that we make are extremely important because they have big long-term effects. If someone sits down and says, “Okay, these are my financial goals.” Then they go and pursue them. And they spend the next 20 years pursuing those goals.
But if someone had showed them like, “Well, here’s three other goals that might be relevant to you,” and they were like, “Oh, no. Those are relevant. And they’re as relevant as the ones I identified.” And that changes your behaviour. You can see why that’s a problem. Because of the whole foundational regrets compounding thing. By the time you get to the future, you can’t go back and change this stuff.
[0:33:44] MS: Another reason why this is at the beginning of our series. Not 20 years from now.
[0:33:49] BF: That’s exactly right. This is a big problem. Now the shortcoming and identifying goals from the research on this seems to stem from not thinking broadly enough about the range of relevant goals, but also from not thinking deeply enough to articulate every goal within the range that is considered. This two-pronged problem.4
Now there are a couple ways to address this. It’s not easy work. Kind of like the values questions that we just talked about. And there’s no magic answer. We can’t tell you what your financial goals should be. But there is a process that we’ve found helpful in our own empirical research. It’s a staged approach.
The way that this works is you list your goals and then you’re challenged to double your list of goals. And this next step is probably more important than that first one. You’re presented with categories that your goals might fall into and asked to add any new goals that come to mind.
In our research on this, and I think it’s probably a pretty good set of categories to use, generally for financial goals, is the PERMA model that we talked about in a previous episode. Positive, emotion, engagement, relationships, meaning and accomplishment. You list those as categories and then fill in goals that you have related to those categories.
We found in our research that that step elicits more abstract goals, which as we talked about previously is a really good thing for long-term goals. And then the last step is to consult the master list containing, at least in theory, all possible goals that you could have in the domain that you’re making a decision about. In this case, financial goals.
Now that’s something I mentioned we’ve done some research on this. We created our own master list of goals. We surveyed 310 people. Each of those people spent about an hour going through this goal-setting exercise and then we took all of the responses and coded them into what we call our master list. It’s available on our website. Anybody can look at it. We’ll link to it in the show notes.
An interesting point and highly relevant to this discussion, and we alluded to this earlier, is that the most common goal in our survey was financial independence or work being optional. It was kind of those two things. I want to be financially independent. Not necessarily retired. But I just want work to be optional. I would interpret that as I want to control my time.
Then the next most important goal in that survey was feeling financially secure. Now how goals are stated is also important. Defining a goal in terms of its desired state, like having more time to play outside instead of its explicit costs, like the means, like the concrete targets that I mentioned earlier, that’s going to increase motivation toward the goal. And framing the desired future state as a goal rather than its means has a powerful effect on motivation.
[0:36:14] MS: When I first heard about that master list and the deliberate approach to goal setting, it kind of blew me away actually. Because this is something so vital. But no advisor ever did that with me or pointed me towards that type of exercise. I actually think this is like something that should be standard for financial planning since the key value add. And it’s currently highly variable. And this is one of those things you have to really do on your own to actually do the work. But to have someone put that tool in your lap I think is really important.
[0:36:42] BF: Yeah. that tool specifically is not standardized. That framework, we came up with that based on Ralph Keeney’s research and our own research. But an interesting point that I want to mention. You think about standardization and regulation. In medicine, for example, it’s highly regulated and cares relatively standardized compared to financial advice, which is kind of a disaster. And I speak as someone who works in that industry.
[0:37:04] MS: Yeah.
[0:37:05] BF: Quebec is a place that is far ahead of I think anywhere else in North America on regulating financial advice. They’ve had a strict legal and regulatory framework in place since 1989. Now the rest of Canada, for context, is only like – I don’t know. Last year or in the last couple of years starting to regulate the title of financial planner. Places other than Quebec, you could say that I’m a financial planner without having any certifications up until recently.
The reason I’m saying this is that, in their textbook on financial planning they, explain how strong the regulatory framework is. And then, basically, the next thing is talking about the financial planning process. And they have a ton of emphasis at the beginning on exactly we just talked about on goal setting and how important it is. They’ve got comments on how clients may have difficulty identifying their goals and how it’s up to the planner to clarify all of the client goals before giving advice. Anyway, I agree with what you said and so does Quebec.
[0:38:02] MS: I hope there’s more movement towards that. Because, really, the whole process should be focused to achieve your goals whereas not focused on some kind of product. That’s kind of been some of the history of that industry. And if we can shift that, that would be really important. I mean, you still have to be an educated consumer and you have to know what your goals are and come prepared to have discussions. But shifting that focus, it’s good they have that right at the beginning. It’s amazing.
The financial planning, really, that is some kind of sacrifice now to achieve a bigger goal later. And the tough part of that is that balance now versus the future. You really want to try to smooth that consumption as you put it. But one of the big challenges that I find with that is that you can make a plan. But no battle plan lasts past the first few shots fired. And you said it, it’s kind of like the Wild West. But financial planning may not be as chaotic and adrenaline-pumping as combat. But there’s definitely going to be bumps and adjustments.
[0:38:55] BF: Yeah. I mean, I personally – and I think I’m a relatively calm person most of the time. I don’t have adverse physiological impacts from financial planning outcomes that don’t line up with hopes or expectations. And that can be things like market volatility or changes in income, like sickness or something like that.
But I can tell you from professional experience that, for some people, the effects of uncertainty are extreme psychologically. And in some cases, physiologically. This stuff is no joke. And we keep talking about how important all this stuff is for how we’re able to express our values and live our lives.
And so, when someone’s met with an outcome they weren’t expecting and their plans get thrown off, you can understand why it would be impactful. The only thing can be certain about financial planning is that unexpected stuff will happen. But the big thing is not to be surprised by it. We have to expect the unexpected.
Now we can’t plan for unexpected outcomes. We can just acknowledge that we’re making decisions under uncertainty and that there’s going to be a range of possible outcomes and we have to be prepared to respond to that. So, that’s where we have things like buffers for short-term bumps. Having enough savings to deal with lower-than-expected returns. Also, more explicitly, more contractually, it’s why we buy insurance for those rare but catastrophic events.
[0:40:07] MS: Yeah, dealing with this short-term certainly is important. But we do have to make sure that long-term trajectory is there because it matters too and knowing about financial independence as a concept. Using it to adjust our course along the way is important. But also, if we have a constant focus on this imagined future, that actually makes us vulnerable as well.
We could sacrifice everything now and have a miserable journey along the way. And then we die unexpectedly before reaching what we think is going to be that better destination. And here we’ve put off something and never reached there. And if we do arrive, we’re going to adapt to that and start looking for the next step. That’s what we do as humans. It’s normal. And that’s actually called the arrival fallacy. Or it’s commonly referred to as moving the goalposts.
If we just focus on that destination, we can have a problem. We need to be able to savour what we’re doing now. And that’s how we can actually combat some of those hazards of having a miserable journey and never reaching a destination is the process itself. that helps us to step off that hedonic treadmill because we’re not always looking for that next level because we’re actually enjoying the current one. We don’t feel the need to ratchet it up as much.
And it’s like spending money and maximizing lasting happiness, which we spoke about in our previous episode. It’s better when it’s shared with our friends and our family along the way with us. Leveraging all those principles that we talked about in episode three, to make working towards the goals, is an important part of the goals process itself.
[0:41:36] BF: What you just said is super important. And again, I mean, I don’t want to keep repeating why we’ve ordered the episodes the way that we have. But we’ve covered how we’re bad at affective forecasting. We’re bad at what will make us happier, sad in the future. That means that moving towards your goals shouldn’t feel like a chore.
Intrinsic motivation to pursue the means toward a goal is one of the best predictors of adherence to achieving it.5 That’s based on empirical research. The implication for goal setting is super important. If you don’t enjoy the means or if the means don’t feel like they’re accomplishing the goal, it’s going to be more challenging to stick with whatever the thing is that you’re trying to achieve. And you might be miserable along the way, which is not ideal for the reasons that you just articulated, Mark.
This was another, for me, memorable segment from our conversation with Chris Hadfield, a Canadian astronaut, when he was on Rational Reminder. He achieved this massive goal that nobody statistically achieves of becoming an astronaut. Now we asked him. Like, obviously, he achieved this goal. But the odds were big time against him.
We asked him how he pursued that goal while knowing that he probably would not achieve it. And he explained that you need to have big, hairy, audacious goals and ideas, but you can’t count on them to be happy. I just think that’s so powerful. You need to be absolutely deliberate in enjoying the process of every day and not waiting for some uncontrollable future event in order to feel good about yourself. That is powerful stuff.
[0:43:00] MS: Yeah. I think the other aspect of that is to make sure beyond making the goals enjoyable is to make them small and frequent targets along the way. That way, when you’re pursuing it, you don’t have this one massive goal that you finally achieve like becoming an astronaut. And then the joy of that may not last all that long.6 But you get a lot of little pleasure hits along the way progressing towards that goal. Having small, frequent pleasure hits as opposed to just one big one. Because it’s going to not be that long-lasting regardless. The bigger the goal is doesn’t mean that it lasts longer than ones that are smaller. And there is some research to show that post-goal pleasure is actually short-lived. And this multiple happiness chemical hits may be better than the big occasional one.
Collectively, we get much more pleasure from the journey in the small milestones. But to hit those milestones, we need to have measurable targets.
Setting Measurable Targets for Goals
That comes to our next session, which is setting measurable targets for goals. And making measurable and concrete targets helps us. It helps on a day-to-day basis because it’s right there and it’s easier to compete against the day-to-day distractions that may take us away from our desired path than something that’s more abstract in the future.
And people care about meeting their targets. They get upset when they don’t meet them. Setting a target of saving a thousand dollars is powerful because people tend to see anything below reaching that target as a loss. And we know from some of the other research that people are – they’re very loss averse. And they feel disappointed when they miss out. They feel excited when they get something. But they feel more disappointed about the missing out part. That loss aversion makes people work hard to try to achieve and meet their targets because they want to avoid that unpleasant sensation.7
And we can use that for our financial planning because we can say, for example, I want to put a thousand dollars into my TFSA this month. And that’s better competition for I want that new phone. Because the excitement of the new phone is now fighting against the pain of missing your target in lifetime. And that short-term target may make it easier in the moment than that sort of more abstract goal like I want to save for retirement, which may not mean so much when you’re staring that shiny, new screen in the face and it has four camera lenses and your current phone only has two. You need something to compete against that. That ultimate abstract goal may be the ultimate objective. But that target is actionable in the moment.
[0:45:19] BF: And targets are ideally optimistic or challenging. They’re measurable. They’re actionable and they’re self-set.8 This again comes from Ayelet Fishbach, who’s an expert on this stuff. Goals should be optimistic because people tend to overestimate what they’ll actually be able to accomplish in a period of time. That’s known as a planning fallacy.
Optimistic targets like a tight deadline for something that you want to accomplish can be helpful. And they’re also actually on their own motivating. And they increase productivity having ambitious targets, like my tight deadline example. There’s two things there. There’s the planning fallacy. And then optimizing targets also increase motivation.9
Goals should be measurable because we need to be able to measure and monitor progress toward the goal. If you can’t measure it, you can easily move the goalpost or not celebrate when you achieve the goal. Like we mentioned with not realizing the FIRE situation for you earlier.
They should be actionable to make it easy to know whether you’re doing the right thing. A simple example is dieting, where if you have to count every single calorie in order to stick to a diet. It’s going to be kind of hard or if you’ve got like a scale and you’re weighing all of your food and stuff like that. It’s not so easy. But a simpler diet would be like avoiding certain types of foods or only eating certain types of foods, that’s much more actionable.
I’m sure we could think of similar examples for financial planning. But that actionable piece is really important. And they’ve got to be self-set. I like this one because it resonates with me I guess as it does with many people. That’s why there’s research on it. People are often averse to being told what to do. Setting your own targets can actually increase motivation.10 If I tell you how much you need to save, you’re less likely to stick to it.
[0:46:46] MS: Actively sabotage it. Anyone who has teenagers will know what I’m talking about with that one. I think actually one of the important nuances with making those targets actionable is to make sure that you actually focus on things that you can control too.
For example, targeting a 10% annual return on my investment portfolio. That’s not a good target. I actually can’t do anything to control markets. I can’t take action on that really. But investing a thousand dollars in a cost-effective diversified way to match my risk tolerance, that would be a good target. Because I can actually control all of those actions, which makes that much more meaningful.
We’ve referred to Ayelet Fishbach repeatedly here when they were back on the Rational Reminder. Remember she said that for a goal like retirement where the mean savings is not that fun. Maybe some people might find it fun. But most people don’t find the saving part fun itself. But the long-term benefit for your future self is important. But that future self maybe – they feel like a stranger.
Monitoring progress towards the goal is one of the most powerful ways to stay motivated if we don’t have that other connection. And we talked about safer withdrawal rates earlier. And that really puts it into the present. And I think that’s one of the reasons why they’re so popular. It makes it easy to see your progress towards a big goal like financial independence because you can relate to it.
[0:48:03] BF: I really think that’s why the 4% rule or whatever percent rule are so popular. Because it gives you a number and you can measure your progress towards the number. But it’s also a dangerous game though. Because if you’re measuring an asset value that you’re trying to achieve, like your example of returns being unknowable. If you’ve made a bunch of progress because you’re saving and working really hard and the market tanks by 20%, that might not feel so good.
[0:48:25] MS: No.
[0:48:26] BF: Making the saving target the goal as opposed to the total accumulation or whatever is probably sensible.
Automating Goal Attainment
In our previous example of having a target for saving in the TFSA, we’re assuming that a conscious decision had to be made trading off between the phone and putting the money into the TFSA. And that’s still useful. Having a target for that reason is still useful. I’m not taking away from that. But one of the best ways to stick to that kind of goal is automation.
Some amount of money. Say it’s a thousand dollars into your TFSA. Just don’t give yourself the chance to spend it. And you can set that up relatively easily most of the time.
Now one of the things you still have to be careful of is using a credit card. Just because you don’t have cash doesn’t mean you can’t spend money that they don’t have. And that’s a whole other topic for a future episode. But, anyway, automation can be really useful.
[0:49:10] MS: Yeah not only does it make it easy to make those decisions. It offloads that cognitive load. It’s like having a decision-making policy that you’ve just enacted automatically so you don’t have to think about it.
[0:49:19] BF: Yeah, exactly. Now we’re talking about goals. Once you’ve got your goals identified, something that will happen, I can guarantee it, is that there will be goal conflicts.
Managing Goal Trade-Offs
Balancing the means to achieving multiple goals is a complex task that requires deliberate planning.
And we’ve talked about abstract goals and enjoying the means to achieving them. Some means are going to be what are called multi-final. Meaning that they serve more than one goal. Some means are going to be equi-final. Meaning that they are one of multiple means that serve the same goal. And some means are going to be uni-final. Meaning they serve only a single goal.
A good example of a multi-final means was karate, Mark, and your example in a previous episode. There’s a means and achieve multiple goals at once. Equi-final means are multiple means to achieve the same goal. That’s like walking to work, hiking and swimming. They all serve the goal of exercising more.
A uni-final means might be saving for retirement, which serves basically the sole goal of financial independence. And multi-final means, while they’re going to be efficient, from the perspective of motivation science, they can actually weaken the mental link between the top-level abstract goal and its means. It seems though I’ll make all of my means, all of my actions are going to be multi-final. But that may not actually be optimal because it can decrease motivation.
[0:50:36] MS: You have to pick and choose really.
[0:50:38] BF: Yeah.
[0:50:38] MS: You’re going to have these kind of conflicts. And thinking about your means and how the methods interact with each other is going to be important because you need to resolve those conflicts. And one of the ways that you can do that better is by having some plan in advance. When you inevitably come into these conflicts, being able to prioritize some over the others may help you. And you’re gonna have to have some way of compromise between multiple goals sometimes as well.
Articulating an actual hierarchy or a ranking of your goals and putting that down even on a piece of paper, that can be really helpful and kind of ingraining that something simple and easy to come back to. As a rule of thumb, when you view a goal as central to your identity11 or see it as a moral or ethical issue,12 then it makes sense to rank that highly. And there’s empirical research to kind of suggest that that is the case. And prioritization can make sense when there’s a marginal benefit of the action compared to what’s there.
A good example would be is if you’re exercising and you do your exercises for the day. Well, there’s marginal benefit to then going and exercising again. But if you have an assignment that’s due tomorrow and you’ve exercised once per day, well, there’s high marginal benefit to finishing that assignment and getting it in. Picking the option out of the two that’s going to give you the most benefit for the time that you spend helps you to prioritize those two goals against each other.
I think to summarize that really, a compromise can make sense if the goals are not central to your identity. You could make some compromises there and get by with that. If it doesn’t involve the moral or unethical issue, you could make a compromise there. Or if there’s going to be some decreasing marginal benefit to one of the options, you could compromise on that as well.
The measurement on the Money Scope is at 60 centimeters, which is about as far as I think it’ll go for today. But I think we’ve achieved all of our goals that we set out for the episode anyways. Let’s pull it out, debrief and get you prepping for the next procedure.
Post-op Debrief
Great. In this episode, we talked about financial independence. What it is. How to measure it and how it can be used. We also talked about identifying your values. And we gave some exercises to help with that. We talked about setting goals, which are aligned with those long-term abstract concepts like our values. But also, making some targets to help us in the short-term to get there along the way.
[0:53:02] BF: Yeah. We started with the example of financial independence as a goal, because it’s the top financial goal from our goals master list. But financial Independence generally frees you, express your values with fewer time constraints. It’s a useful way to talk through thinking about why this stuff is important.
Now it is important to understand that financial independence is really more of a means to achieving other goals. Not an end goal itself. We talked in a past episode about how too much free time can lead to unhappiness. Mark described how financial independence has worked for him. But I think that understanding that just saving a whole bunch of money so that I don’t have to do anything, that’s maybe not a good goal.
[0:53:39] MS: Yeah, it’s not going to work out. And you really have to know your values, to set goals and create targets that’s vital. But doing all of that isn’t easy if you don’t have a process. And Ben described the effortful process of thinking through important questions that point to your values with those exercises we had in the middle. And then using categorical prompts and a guided list to help identify goals that are important to you. So, you can figure those out now and not in 20 years from now when you wish you’d thought about them.
And identifying the goal is important, but so is how you state it. Effective goals are statements of that desirable future state. Not the means to get there. That abstract concept is important empirically. And then to execute it also helps to have an enjoyable journey where the means of working toward the goal is enjoyable. Because the thing is you’re going to spend more time enjoying the process and small victories and the destination of achieving the goal.
And of course, the destination is not guaranteed. Like we talked about uncertainty. If you have this big thing that you want to achieve and you’re going to dedicate a bunch of time and resources to achieving it, it’s not guaranteed if you don’t enjoy the process of trying to get there. It’s probably not a good way to set yourself up. So, you really got to enjoy that journey.
[0:54:43] MS: Yeah. And once you know what it takes to achieve a goal, setting measurable targets is extremely important. And finally, it’s important to have a system for managing conflict with your goals. Because that’s inevitable that that’s going to happen.
[0:54:56] BF: Yeah. We had those heavy-duty thinking exercises to help you identify your values. In terms of homework, I think doing those exercises and really going through those questions and thinking about them. That should keep you busy at least until the next episode.
[0:55:10] MS: Yeah. And we hope you’ve enjoyed the journey with us today. And in preparation for the next time, take the time to make your own goals lists. Use the master list to expand it. Break down some of your main goals into some short-term concrete type targets. Try to automate them if you can. And we will put a link to the survey summary on the Rational Reminder episode page.
Footnotes
- Keeney, Ralph L. 2020. Give Yourself a Nudge: Helping Smart People Make Smarter Personal and Business Decisions. Cambridge: Cambridge University Press. doi:10.1017/9781108776707 ↩︎
- Fishbach, A. (2022). Get it done: Surprising lessons from the science of motivation (First edition). Little, Brown Spark. ↩︎
- Bond, S. D., Carlson, K. A., & Keeney, R. L. (2008). Generating objectives: Can decision makers articulate what they want? Management Science, 54(1), 56–70. https://doi.org/10.1287/mnsc.1070.0754 ↩︎
- Bond, S. D., Carlson, K. A., & Keeney, R. L. (2010). Improving the generation of decision objectives. Decision Analysis, 7(3), 238–255. https://doi.org/10.1287/deca.1100.0172 ↩︎
- Woolley, K., & Fishbach, A. (2016). For the fun of it: Harnessing immediate rewards to increase persistence in long-term goals. Journal of Consumer Research, 42(6), 952–966. https://doi.org/10.1093/jcr/ucv098 ↩︎
- Davidson, R. J. (1998). Affective style and affective disorders: Perspectives from affective neuroscience. Cognition and Emotion, 12(3), 307–330. https://doi.org/10.1080/026999398379628 ↩︎
- Fishbach, A. (2022). Get it done: Surprising lessons from the science of motivation (First edition). Little, Brown Spark. ↩︎
- Fishbach, A. (2022). Get it done: Surprising lessons from the science of motivation (First edition). Little, Brown Spark. ↩︎
- Zhang, Y., Fishbach, A., & Dhar, R. (2007). When thinking beats doing: The role of optimistic expectations in goal-based choice. Journal of Consumer Research, 34(4), 567–578. https://doi.org/10.1086/520071 ↩︎
- Brehm, J. W. (1966). A theory of psychological reactance. Academic Press. ↩︎
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Net worth is a commonly used measure of wealth. Find out how I calculate and use it. I have tracked my net worth changes for over 15 years. Join me as I unpack my net worth journey and share insights from the data.
My Net Worth Dropped. My Financial Goals Were Met.
A glimpse into my financial performance in 2022 and the preceding 15 years of my investing. My portfolio shrank this year, but I still feel pretty pumped up. See how my processed have evolved. Learn more about how to set and modify financial goals to build wealth and improve your investing performance.
The Decumulator: Retirement Drawdown Calculator
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