Can you recall a time when you have sold an item for less than what you paid? Can you recall a time when you bought an item for less than you knew it was worth? Surely you remember how you felt in each of those scenarios.

Why does this matter? When we aim to achieve a goal, we identify the steps we are willing to take to achieve it, but we often forget to consider the behaviors that may be needed to supplement those steps and the behaviors that may be beneficial to avoid. 

Behaviors beneficial for supplementing the path to your goal may include self-control, automation, and reframing. Self-control involves delaying or avoiding short-term gratification to achieve a better outcome later. You can exercise self-control by consciously choosing to think about how good you will feel by achieving your goal rather than focusing on what you are giving up in the short-term to achieve it. Automation involves enabling a process that helps you to move toward your goal without requiring additional action after initial set-up. An example of this is setting up an automatic transfer from your checking account into your savings account. Reframing is the act of acknowledging your negative thoughts but focusing on different, affirming thoughts. For example, you may acknowledge thoughts like I have tried saving money before and it has never worked out. In reframing those thoughts, you may write down: My plan to save money worked. I overcame obstacles, followed my plan, and now have my goal of X dollars saved. Successful outcomes have been achieved by people choosing to write their goals down in the past tense: try it out. 

Behaviors that may be beneficial to avoid include lack of self-control, planning fallacy, and relativity. Most of us are familiar with the lack of self-control. It often happens when we are tempted by the short-term gratification of getting something we want right now instead of waiting to achieve a better outcome in the future. For example, spending money right now on your favorite Starbucks drink may be more gratifying than saving that money to achieve another goal. 

Planning fallacy may be an unfamiliar term, but it involves the familiar situation of underestimating the time and resources required to turn a plan into a reality. For example, you may plan to go to a sports event at 6:00 PM but you are expected to work until 5:30 PM. You buy tickets for the event and tell your friends you’ll be there. You’re thinking that you may get off early so you can easily make the commute of 15 minutes. The reality is that you end up staying later than expected, getting delayed in traffic, and arriving at 6:30 PM. To avoid this behavior, allow yourself more time than you think you may need.

Relativity is the term associated with the idea of keeping up with the Joneses. You may choose to compare where you are in reaching your goal to where others appear to be right now. Social media tends to fuel this behavior. To avoid this behavior, consider sorting through your social media feed. If you find yourself comparing your situation to someone else’s, consider unfollowing them or silencing their feed. 

Let’s bring some of these concepts together in a hypothetical case study of Ms. Doe, a fictional character.

Ms. Doe decides to invest in the stock market in 2023 and creates a 5-step plan to carry out her decision. She calls her plan, “2023: The First Year of My Brokerage Account”:

1. Open a brokerage account featuring zero trading fees with $100.
2. Invest the $100 in an index fund.
3. Set up an automatic weekly transfer of $25 from checking account to brokerage account.
4. Set up an automatic investment plan so the money transferred into the brokerage account gets invested right away.
5. At year-end, confirm $1300 total was moved into the brokerage account, re-evaluate plan, and review investment performance.

Ms. Doe writes her plan down in her journal. Beneath her plan, she writes the following and today’s date:

My plan was successful because I 

• made sure $125 was in my checking account every month so the transfer could be made,
• set up automatic transfers,
• checked the brokerage account on the 15th of the month to confirm transfers were made,
• focused on the outcome of my goal and not investment performance.

Ms. Doe’s plan includes automation which is designed to support her self-discipline. Automation also helps her to avoid planning fallacy: if the transfers are automated, her plan of transferring a minimum of $1,300 into her brokerage account ($25 per week x 52 weeks = $1,300) is likely to occur. Note: Ms. Doe does not fixate on achieving a specific investment performance outcome but meeting her goal of transferring $25/week for 52 weeks. Ms. Doe positively frames the experience of following her plan by writing a note to herself in the past tense about why her plan is successful prior to completing her plan. 

By acknowledging the variety of human behaviors that predicate positive and negative outcomes, we may proactively choose which behaviors are beneficial and which behaviors we should avoid in order to achieve our goals. 

Wendolyn Forbes is a CERTIFIED FINANCIAL PLANNER™ with Wealth Transition Finance, A Member of Advisory Services Network, LLC, where she offers financial planning and investment management services for either a one-time or on-going cost. For more information about Wendolyn’s financial services practice, please visit her website at www.wtf-asn.com. 

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

This material is provided as a courtesy and for educational purposes only.  Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.