Personal Benchmark: Integrating Behavioral Finance and Investment Management

Chapter 7Using a Goals-Based Approach

Dr. Daniel Crosby

Obstacles are those frightful things you see when you take your eyes off your goal.

—Henry Ford

If you're like so many Americans, you probably make a list of your goals at the beginning of each year. Whatever form those resolutions take—whether the goals are physical, financial, or relational, they likely have two foundational elements: (a) they are specific to you, meaning they have personal value for you, and (b) they are aspirational, meaning they have an element of being emotional and inspirational.

For example, this year, I decided set the goal to lose 15 pounds so that I could have more energy to keep up with my 5-year-old. Personal value? Check. I am sick of hearing, “Come onnn, Daddy!” Aspirational? Absolutely—I want to finally win one of our backyard races.

Some time later in the year, you may or may not be on track to meet your resolutions. A recent hop on the scale tells me that I am not. But regardless of your current progress, your goals will stand as ever-present reminders of the person you could be, if you were willing to do the necessary work. As silly as it may sound, let's imagine goals that violate the two foundational elements we mentioned above: That is, let's assume you created an impersonal goal that lacked aspiration. For example, one year I set the goal of being able to play the longest running game of Monopoly in my group of friends. My friend, Bobby held the record—17 hours. In the end, I realized ...