This easy trick will help you achieve your financial goals

By David FieldingSmiling Chef in a Kitchen

Here’s a true story: Not long after my wife and I moved into the house we live in now, we found a note collecting dust on top of one of the kitchen cupboards. It was a list, placed there by the previous occupant. The second item caught my eye: “Buy a better house.” Great, I remember thinking at the time, we live in some guy’s discarded heap.

Over time, my instant dislike for this better-house-buyer grew into respect. The guy clearly got what he wanted.

It’s often the case that the biggest obstacle standing between the stuff we really want in life (a better house, a killer vacation, a little security) and the stuff we actually spend our money on (so much useless junk) is a clear sense of purpose. That is to say, the trick to achieving a financial goal is pretty simple: Set a financial goal.

There has been a lot of research on this subject. Some of it is very old: Aristotle’s theory of “final causality” stated that purpose leads to action. That was around 350 B.C. In a more recent study at the Dominican University of California, participants who were instructed to write down a goal were found to be significantly more likely to achieve it. In the study, some groups were also asked to make public commitments, while others were given regular reminders of their written goals. But overall the analysis revealed that the mean achievement scores were significantly higher for those who had written down their goals than for those who had not. Magic, right?

Not really. It all boils down to keeping a long-term view of things when challenged with short-term temptations. In other words, when your friends reaaaally want you to come to the bar, people who successfully achieve their goals are able to overcome their present desires and think of the future — and invite their friends to hang out at their place instead.

To learn why goals work, we can look to the work of a pair of psychologists: Dr. Edwin Lock and Dr. Gary Lantham. Their pioneering research into the power of goal-setting uncovered four powerful ways goals work:

1. They give us focus. Goals narrow our attention, provide guardrails for our financial decision-making and lower the cognitive effort of our daily lives. They allow us to ask ourselves questions like: Is a new pair of jeans more important than staying on track toward my goal?

2. They promote effort. Locke and Lantham’s research has shown that we are likely to put more effort into finite achievable goals (e.g. a trip to Barcelona!) than vague targets (e.g. spend less money this year). These are called concrete goals.

3. They make us tougher. Another thing Locke and Lantham found is that people are more likely to push through setbacks when they have a concrete goal in mind. The thought of that trip to Barcelona can be the motivation needed to power through another day of leftovers instead of an extra trip to the grocery store.

4. And they have the power to change habits. This is a biggie. Their research has shown that goals can be a catalyst to develop and change behaviours. When we develop a new habit (say packing a lunch on weekdays), we tend to continue even after a goal has been achieved. Awesome, right?

But maybe the biggest reason goals work is a simple one: because we believe they do. As the Nobel Prize–winning economist Daniel Kahnemen once wrote, our “confidence in future success sustains a positive mood that enhances [our] prospects of prevailing. When action is needed, optimism, even of the mildly delusional variety, may be a good thing.”

So, if you’ve read this far, here’s what you should do: Get a piece of paper, pour yourself a coffee and write down three things you would love to do if you had the money. Would you go on a trip, buy a car, get married, quit your job? Maybe you’d like to buy a better house? Write it down.

But don’t stick it on top of a kitchen cupboard. Instead, take a picture of the list and set it as your smartphone wallpaper. Every time you pull out your phone, look at the list and ask yourself: Am I moving closer to my goals?

I bet you will be.


Make saving as easy as spending

Set a goal and make it happen.