Life goals and financial goals
In life, most of us aim to achieve success but all of us aim to achieve happiness. I have personally confused these terms too often and have been successful in many activities (e.g. getting a job, promotions, graduating summa cum laude, starting a company) but unhappy as this was not truly what I wanted. I have realized that in my life not only I, but many other people struggle with these concepts. Many of us achieve goals daily but sometimes we are still not happy. I think this is because not all goals “are equal”.
Goals have become a part of our life, at work even at home, we aim to set goals to achieve success. On Instagram, we constantly see posts about some millionaire and how important goals are. People, try to blindly emulate such rich people and think they would be successful and happy too. Probably the only person who makes a distinction about success and happiness is Gary V (a social media guru).
In my case, I decided to go a step further and try to define how I see those. To me success is achieving a goal (something we wanted to achieve). Happiness is wanting what we have achieved (i.e. how important what we achieved really is). While this might not be a perfect explanation, it helps us steer clear from making mistakes such as saying “my goal is to graduate from finance”. No, a goal is to become a finance professional but an action related to accomplishing this goal is to graduate from finance school. Whether this would bring a person success depends on whether he/she has the passion for this, whether he/she really wanted to become a finance professional (or did it to be successful). In essence, to be happy, my idea is that I need to achieve my life goals (the things that really matter to me). In the progress, I might be unsuccessful many times, but I will still be happy because I am working on something which is important to me.
In investing, more than 50% still think that investing is about making money. Some organizations have caught on and have started to focus investing on retirement for instance (and portray is at as a life goal). I would like to stretch this idea further because I think that actually everything we aim to accomplish to be happy can be expressed as a financial goal. For instance, if I want to make a difference for the UN, I could volunteer and work for them or I can donate a specific amount. If I have a 1000 euro today, I can invest it and make it in 10,000 and thus donate 10,000 instead of 1,000 to have a much more meaningful personal impact. When helping people is important to me, having a bigger impact (yes in a longer time) I can be happy about donating 10,000 euro but I can also be happy about the way in which I did it (achieving success in investing).
I’d say investing begins by defining our life goals which we aim to attain to be happy. And I know this might be a super hard thing to do, but I think it is not so hard if we really think about it. From here, these goals can be expressed further into financial or numeric goals. In my case, I have the life goals of achieving financial success through investing (and running a 10 million investment company) and the social goal of helping at least 1,000,000 people. This is why I also worked for brands which aim to improve people’s lives. However, I decided to have my own separate impact. Therefore, teaching this methodology and way of thinking is hopefully my social value creation where I help people understand 1) how to accomplish happiness and 2) how to be successful in the activities which make them happy.
In essence, I apply this model for myself, my own life and I feel so happy about doing this. This is why I think correcting 3 misconceptions on super important topics – happiness, success and investing allows me to clarify many things on which people are confused and hopefully to help them understand the meaning of these 3 words.
Success = achieve what I want
Happiness = the combination of things which we really want to achieve (this will still not be our full happiness because a lot of it happens based on spontaneous moments with our family, children, pets and so on, but to be able to have those moments, usually we have to in the “mindset to be happy”) Due to many problems, people often prevent themselves from because they focus on the negative. However, if we spend 80% on activities which make us happy instead of those we don’t like, aren’t we going to be happier? So while this is not the full concept of happiness, it might be the overarching goal because if we accomplish 1) happiness mindset and 2) work on things that make us happy we ought to be feeling a bit if not much happier.
Planning = translating life goals into financial goals
Investing = the path to achieving our life goals which put us in the happy mindset and reflect the financial contributions we need to make to spend our time enjoying the activities we want to make us happy
Life goals – accomplishing the things that are truly important for us and play a role in our happiness. Buying a house to have my first child and hopefully to see my grandchildren. This would make me happy because I cannot plan for the spontaneous moments which I can have with my family, but I can plan having the house where these moments can take place; Having a child could be another such goal. While some could argue that this cannot be planned, it will cost about 800-1.2 mil to raise a child from 0 to about 18-20. So the cost associated with this happiness and not allowing this part of life to become an unhappiness (due to improper planning) could also be an important life goal for which we can plan.
A specific person’s life and financial goals
Traveling and retirement are considered the important life goals. I cannot say if these are truly his life goals, but accomplishing those would make the client happier in his words. So this an example
With some additional discussions with person it could have been further estimated that the costs of these trips would be around 1,000 per trip over the next 30 years. Simply put, from 60 to 90 he wants to have the ability to take 20-30 vacations, so this would be around 20-30x times 1,000 dollars. In this way, it can be seen how many of the “spontaneous pieces of happiness” (i.e. seeing a beautiful sunset) can happen by planning our happiness (i.e. being able to take 30 vacations and try to glimpse a beautiful sunset, mountain, lake so on) and in this sense plan for what is really important to us (what will make us happy) and allow this happiness to be boosted further (by the spontaneous moments and family members and so on).
This can be seen from the graph below. For traveling about 31k and for retirement about 500k. I will not go about the calculations here. But I just wanted to point out this simple concept of happiness, success, investing in one place. It seems so logical that to me it’s ridiculous that all of us have not even been taught to think about the world in this way.
So, in essence, to achieve happiness by travelling, we can plan our travelling expenses and make sure we can have the time (provided that we are healthy) that we can achieve these goals. And with the risk of saying yeah but none of us can be sure to be healthy, I think we can also make a lot of efforts in that direction to make sure we can make the most of our happiness and not harm ourselves. In essence, I think life is beautiful and we must be happy. Often we are unhappy because we do the wrong things, we cannot plan and achieve the wrong objectives. If we however, can define what our happiness is in a broad sense in terms of life goals, we can turn these life goals into financial goals and learn exactly “how close or how far we are” from achieving the most important things to our happiness (and thus plan for it, and even be happy and excited knowing we are working on it). So taking charge of our own happiness has to be a conscious decision.
In statistics, we talk about statistical control when we mean keeping a process the same, while there are many variables to our happiness, we can focus on sustaining one non-variable (constant) which can help us achieve our overall happiness (and those small things would matter less). So the focus is if we can take all the trips we planned, we might enjoy a bit more of everything which they have to offer. For sure, there can be factors which affect us negatively (e.g. late flight, but their impact could be much smaller say when we arrive at a beautiful beach (later that night instead of that day).
Let’s say we have asked the client to list all his assets relative to his goal to determine “how close/far” he is. In this case, he had assets worth $211,880 and wants to grow them to around $560,000 during 11 years (after which he plans to retire and enjoy these benefits for at least 19 years). This might seem a bit odd, and I agree is not perfect. But in finance, we might have to make some assumptions such as we aim to spend this money for 20 years or go to 20 vacations for 20 years. In this we can risk being overly specific, but at least the client knows he can play for at least 20 vacations (which is not bad given that he has taken about 40 in his 40 years of present life), so being able to plan these out has a huge potential impact (in terms of happiness and saving headaches and problems).
In essence, this life goal which became a financial goal can also become an investment goal. Therefore, the intent of the person would be to grow his present capital to the desired financial goal value. In essence, I do not know whether this will make him truly happy. But I think this will make him happier, and if we think about more or even most things in this way, we can accomplish more happiness than people who do not understand this concept.
Even the biggest financial advisors start from these investment goals. They focus people on having clear and specific financial goals without relation to anything else. I think it is much easier to understand the relationship between happiness, success, life goals, financial goals an investing goals and then to clarify those investment goals.
.I imagine by now all of us are familiar with “SMART” goals (goals which are specific, measurable, attainable, realistic and can be accomplished in a time-defined period, there are some variations of the SMART terms) but this is where it becomes suitable for investing. I don’t think this model applies well to our life goals. However, once we move from life goals to financial goals and are able to derive the those, we need to “define our INTENT”. The INTENT is the way in which we aim to accomplish this goal – e.g. by saving or by investing. Then, we can take “Actions” (e.g. saving 2,000 dollars monthly or investing $2,000 monthly to achieve my life goals). The second option represents acting on a “SMART” investing goal, based on the intent to accomplish this goal through investing. The first, represents a SMART saving goal.
We can of course be in debt, which creates a lot of stress on us. Another life goal might be to get out of debt, and saving might be a better option rather than investing. The whole point this article aims to offer is that happiness (for the most part of it) can be defined in terms of life goals. Those life goals can be expressed in terms of financial goals (whether it’s going out of debt or buying a house). Some of those can be expressed as investment goals. However, each of these life goals is attainable by planning our intentions and actions. In this way, being happy is not left to be random, but is in a way under our statistical control and we can take actions daily according to our intent to accomplish these life goals.