It is January. New Year, New You and all that.
While most people are about to fall off their vague New Year’s resolutions, January marks a time of something different in the Fer household….
But first a little comment on New Year’s resolutions (or really any goal you make). You have to set something specific, measurable, timed, and action-oriented.
If you like acronyms, you can use SMART-A (like assume you are a speech-impeded Bostonian saying smarter), which takes the corporate world SMART acronym and adds the F’er twist of adding an O item.
S - Specific
M - Measurable
A - Attainable
R - Relevant
T - Time Bound
I will often say ‘SMART’ works for goals because it is commonly used. But between us ‘attainable’ is too limiting and often has people setting soft, easy goals. And ‘relevant’ seems like a self-evident thing…like wtaf are you going to do, set an irrelevant goal. If you are fat are you going to set a goal like ‘wear the color blue more’? I think the consultant who came up with SMART had SMAT and needed an R.
But the SMT part of SMART goals is solid.
“I need to lose weight” is not a good goal. It is vague. If you lose 1lb in 2024 you technically hit the goal, but that isn’t really what you set out to do.
“I will lose 15lbs by June 30th” is a better goal since it is something you can see if you pass and there is a time deadline.
But even that can be improved.
The problem with SMART is that it leads to outcome focused goals that people start to chase the metric not the result.
This happens a lot in the corporate world. If you tie compensation to achieving some metric, the focus becomes the metric, not the result you are actually looking to achieve. An example might help to clear this up.
Let’s say you own a business and you want to make more money. You sell widgets and each widget earns you $1. Last year you sold 100 widgets and pocketed $100. So you set a goal like “sell 200 widgets in 2024” and set up bonuses based on achieving that goal. You lay out a nice plan for ramping widget sales each quarter using some nice powerpoint templates. The end of the year comes and your company hit the goal, 200 widgets sold. But you look at your earnings and they are only $110 before the bonus and $90 after.
Well in this simplified example, there can be a host of ways this went wrong.
Sales guys ran promos and teasers to get sales that didn’t result in renewals at regular margins so your margins got squeezed.
Widget makers had to work overtime near quarter-end as there is a big push to get widgets delivered which ate into margins
You chased low-value widget customers who ended up making returns leading to a big increase in an expense line-item that offset sales
Widget-making machines are pushed past capacity resulting in more expensive repairs and maintenance
etc. etc…I don’t know, I don’t make widgets so there is likely dozens of ways this goal fails.
You wanted more earnings. You set a goal that you thought would increase the earnings. But then the goal of your employees was on hitting the metric (sell 200 widgets) not achieving the desired outcome (increased earnings).
If you sold 120 widgets and kept the $1 margin, you would have been better off ($120 is greater than $100 you earned last year and even more greater than the $90 you earned this year), but 120 widget sales would have been seen as a huge miss vs the metric of 200 sales.
Similarly, when people say their goal is to ‘lose X pounds’, what they really mean is ‘look a lot sexier’. If you could look like [insert dream body here] but when you stepped on the scale it said 350lbs, would you? The answer would obviously be yes. The goal is a look.
So if someone set a goal of losing 15lbs, but as part of that process you start lifting weights. You lose 15lbs of fat and put on 10lbs of muscle (ahhh those newbie gains), you would be only 5lbs less on the scale, but likely much closer to achieving what your real goal was - be sexy.
And this is the pitfall so many people fall into even when they try to set good goals. They want to lose 15lbs so they diet and do cardio and lose the weight (some fat and some muscle), and just look like the same soft unsexy (albeit slightly smaller) version.
Or, even worse, they do all the right things and life just throws them a curveball. What if you do all the right things, but you have a new baby keeping you from sleeping so your hormones are out of whack, and your boss is making your life hell, and your cortisol is through the roof so its making it increasingly hard to achieve the goal. Did you fail?
So SMART isn’t enough.
When you set goals, you want them to be something you fully can control (action-oriented) that are specific and measurable and time bound.
You may not be able to control the exact weight on the scale. But you can control the actions you take.
“I will lift weights 3x a week using progressive overload, do cardio 2x a week where I burn 500cals on the machine, and walk at least 5,000 steps every day between now and June 30th” is a good goal. Those are all actions you can control. They are measurable and specific. And doing it will progress you towards your goal.
Maybe a better acronym would be MATS since that would be the 4 letters you need. Measurable, Action-orient, time bound, and specific.
This is a financial stack, so to translate it into finances.
“I will do better with money” = not good resolution
“I will grow my networth $10k” = better, but if markets go down you could have a lower net worth even if you do everything right.
“I will set a budget that allows me to save and invest 25% of my income every month and will put 1/2 of that into my emergency fund and 1/2 into investments” = much better
I bet if you set better goals, you will see better success than the New Year’s resolutioners at the gym who set out to ‘get in shape’ but without a specific, action oriented task (like go to gym 3x a week), they are already starting to drop off in gym attendance.
Anyways, this wasn’t the main point of the post, but a nice rant since it is January and you need to use any platform you have to rant on resolutions by decree. To the main point of the post….