The Year Is Yours To Script
The Year Is Yours To Script
Over 4,000 years ago, the concept of the New Year’s Resolution began with the Ancient Babylonians. At the start of the year – which for them was in mid-March – the Babylonians made pledges to the gods for the upcoming year. Most of the pledges – or resolutions – were focused on the settling of debts in order to please their gods and to ensure a strong harvest over the coming year. For many Babylonians, sticking to their resolutions was key to surviving.
When we fast forward to modern times, it’s become a bit harder to stick to the promises we typically make ourselves on New Year’s Day. Most New Year’s Resolutions are too broad, overly ambitious and at times, just not practical. And since financial fitness regularly ends up as one of the top three resolutions (behind losing weight and exercising), it becomes important to focus on how to actually succeed with a New Year’s resolution and goal setting.
Old Wives’ Tales and Goal Setting
So let’s start with a long-standing rumored story about what is known as the Harvard Written Goals Study.
Here’s how the story goes: back in 1979, an experiment was done with Harvard MBAs where they were asked the key question “Have you set clear, written goals for your future and made plans to accomplish them?”
At the beginning of the experiment, the class supposedly responded as follows:
84% of the class had no clear goals – either written or otherwise
13% had goals – but in their mind
3% had clear, written goals
The story of the Harvard MBA class of 1979 goes on to show that 10 years later, when the same peer group was reviewed, the results were that the 13% who had (unwritten) goals, earned 2 times as much as the other 84% and the 3% who wrote down their goals, earned 10 times as much as the other 97%.
Now in the years since this story made the rounds, I should note that no one can confirm the truth of this study, not even Harvard. But the “data” is pretty motivational – in fact, many speakers from Tony Robbins to Zig Ziglar have used this “study” in their talks.
While the study itself might not have happened, at the core of the story is one of the most underutilized features in financial planning – the art of writing.
Yes, you read that correctly – WRITING.
Writing is key to achieve financial goals.
Writing does several things for us – first, it allows us to construct a goal and then, it pushes us to strategically come up with a process to reach it.
While this might seem a simple approach, it’s one that many of us fail to do. So as we launch into 2018, it’s time we try to take advantage of this idea and create a focus for a strong financial year.
Your 2018 Financial Resolution Plan
For 2018, I challenge you to take control of your finances through writing. Here are three ways to structure it:
Set a Goal Framework - When you set out to write your financial goals, you need to think about it in terms of timing. You should have one short-term financial goal, one mid term and one long term. Typically, short-term goals are ones that can be reached within the 12-month period. Mid-term goals are ones that are 3 years or less. Long-term goals are ones that are longer than 3 years.
The more specific the goal, the more focused you can be on it. The goals that often have the most success are ones such as “create a cash reserve of $10,000” or “open and fund a 529 plan for my child.” If you start with specific short-term goals, it often helps drive the longer term ones.
You need a Coach - You need to create a system of accountability with an objective person who can help coach you along the way. Once you have your goals written down and set, you should sit down with your advisor – whether it is an attorney, CPA, or financial planner or even just a good friend who can be supportive – and go through your goal list.
Typically this will create a conversation on how to start taking the steps to achieve the goal. The individual you choose should help challenge your thinking on how to move forward. The bouncing of ideas can be motivating and allow you to work through fears you may have regarding your finances. Further, the coach can check in with you on how you are moving toward your goals and celebrate with you when you achieve them.
Failure and The Power of Resiliency – Finally, be aware that in order to achieve financial goals, you will likely encounter some degree of failure. In any financial experience, there will be ups and downs. The key is to learn from what worked and what didn’t.
So for instance, if you had as a short-term goal that you wanted to max out your 401k in 2018 with $18,500, and you were only able to do half, it still moves you forward financially. But it raises the question, what held you back from achieving the goal? Were you too aggressive given your current living expenses? Did you underestimate other cash flow needs? If you can determine what held you back, it might ultimately propel you forward in the future.
By taking these three steps, you start to move your finances along a more focused and streamlined path to success. It won’t be perfect, but it’s definitely a start in getting closer to where you want to be.
Conclusion – Writing It Down Does Matter!
And as for the studies behind writing down goals – the Harvard Written Goals Study was proven effective – but it wasn’t Harvard that took the steps to confirm. Rather, Dr. Gail Matthews of the Dominican University in California did a study of 267 people. She divided them into two groups – one group wrote down their goals regularly and one group didn’t. At the end of the study, she concluded that you are 42% more likely to achieve your goals if you write them down on a regular basis.
As we embark on 2018, take a chance, grab a pen, and write down your financial future.
Happy New Year!