When we look to create change and success in our finances, we usually focus on setting goals. Goals are incredibly helpful in moving the needle in your finances. Yet they fall short in one key area: they shift the focus away from identity. While behaviors, goals, and identity are intertwined, I’m going to make the case for why we should focus on identity first.
The rule for goal-setting is to make your goals SMART: Specific, Measurable, Attainable, Relevant, and Time-Bound. An example of a SMART goal is, “I will pay off my Visa credit card balance of $8,789.19 by April 30th.” It’s clear what the goal is, and when it will be accomplished. It’s relevant to financial success, because high-interest consumer debt holds you back from other uses for that money, such as investing. An added benefit is you can create an action plan, working back from that date for how you can make that goal happen.
I love goals. The problem is that making changes and improvements is short-term. Eventually, you need to shift to focusing on becoming the person you want to be. A classic reason we fail to reach goals, is that we fail to focus on cultivating the identity of the person we want to be along with specific goals. Even when we do reach a goal, we often fall back into old patterns, because we focused on a specific achievement, rather than fundamentally shifting our identity. That’s why many people fall back into consumer debt more than once, even after paying off current balances.
I am a runner. Not a very good runner, but a runner nonetheless. I planned to run three races in the past 12 months, and I didn’t run any of them, because of COVID-19 restrictions. I didn’t stop being a runner, because I wasn’t running a race. I just became a runner who had to create a different plan for the year. My habit of running routinely remained, because I am runner, but my patterns and focus shifted throughout the year. My individual goals were never realized, but my routine of running continued, albeit in a different guise.
Instead of making making a list of goals, first consider who you want to become over the next 12 months. Do you want to be more intentional with your money? Would you love to be a confident investor? How about someone who is comfortable talking about money with their spouse? In the case of paying off debt, perhaps you want to be someone who is debt-free, or you may want to be someone who has financial freedom.
Now ask yourself what routine behaviors that person would adopt. Perhaps being intentional with your money, means you put a 2-day waiting limit on a purchase, or you start aligning your purchases with your values. Perhaps a confident investor would sign up to receive a daily financial news article (such as through Investopedia.com). Perhaps someone who is comfortable talking about money would simply start having a monthly conversation? You are much more likely to pay off your Visa credit card balance if you decide your identity is debt-free, or built on financial freedom.
Set your goals. But also set out to know who you want to be. Using your personal values is one of the best ways to craft meaningful habits that will support both your identity and your goals.
After all:
The goal isn’t to invest. It’s to become an investor.
The goal isn’t to create a budget. It’s to become an financial steward.
The goal isn’t to read a finance book. It’s to become life-long learner.
Goals are temporary. Focus on who you are becoming.
If you are interested in learning more about how to use your personal values to drive real change in your life and personal finances, feel free to join the Value and Invest Academy group, or send me a direct message.