Escape the Rat Race: Goal Setting Theory

If you’ve ever done any research on becoming financially free or escaping the rat race you will more than likely have heard that those who write down their goals on a sheet of paper are MUCH more likely to succeed. I can’t remember the exact figures off the top of my head but I think the chances of completing a goal if it’s written down increases by a factor of about 20 (or
something like that, I’m sure someone knows the actual stats).

What it means is, if you write your goal down, you are 20 times more likely to achieve it than someone who has the same goal but doesn’t write it down.

I’ve heard people say that life is like sailing a boat on a huge ocean, but most people just follow the breeze because they have no destination. But people who know where they want to be will focus on getting there. I think this is why those who write goals tend to be the people who achieve them.

How to set goals to change your life

Most of the articles and books I have read that talk about goals needing to be measurable. I agree with this almost entirely… but not totally. I believe, when setting a life goal, you should set something that is never achievable, but is something to continuously work toward.

Mine life goal for example is the following: “To have the health and resources to do anything I want”.

To me this is never achievable because there will always be something that I want that I can’t do, but it focuses the mind. So now, take a while to think about (and write down!) your life goal. Make it something totally amazing, something that you can never reach but always continuously work toward.

Now you have your target!

Next, what I did was I looked at my goal and broke it down. My goal had two distinct parts to it. Health and resources. So I took the health part first. Ok, so to do whatever I want I obviously need to be healthy. And to be healthy I need to watch what I eat, exercise regularly, and do all the things required to be healthy. BUT, the next goals (sub-goals) I set were measurable, and had a date at which they needed to be achieved. So here were my health goals:

In one year’s time weigh no more than 12 stone (168lbs). I think at the time I weighed just shy of 13 stone, and at my height google informed me that I am “slightly overweight”.

I then wrote down all the things that I needed to do to lose weight:

At least three one-hour sessions of sport or exercise a week. Etc etc.

For me, being healthy is a life long goal in itself and quite boring. It never stops, but I wrote them down anyway.

The more interesting part my life goal was the “resources” part. There are two resources in the
world – time and money. Ok, so to do anything I wanted, I would need a lot of both, and at the time of writing I had neither. I was in debt, and worked 9-5 (if you include the commute it was more like 7.30-6.30, Monday to Friday.

Fine, that was where I was then, aged 24. I had a lot of debt and this amazing life goal! Ok, where do I start? Well, I started by thinking that the only way I’d have the time to do whatever I wanted was if I didn’t have to work at all. So my “sub-goal” of my life goal was this:

“Be financially free by the age of 30”.

Hmmm… well, this at least is now measurable, and I had given myself 6 years to achieve it. But I realised that this was still a bit pie in the sky, so I kept breaking down my goals into smaller and
smaller sub-goals until I ended up with an action. It looked something like this:

Life Goal: To have the health and resources to do anything I want

Health (ongoing):

• Exercise at least three times a week for one hour
• Do not drink excessively more than once a week (hey, I was still young and enjoyed a few drinks!)

Resources:

• Be financially free by the age of 30
• Be out of debt within a year
• Open a new bank account and pay myself £75 a week for disposable income
• Use all money left over to pay off overdraft
• Once overdraft paid off, pay off Dad (he loaned me money whilst I was at uni)
• Once Dad paid off, put all money towards my car loan.

I wrote these goals down in October 2006, so I wanted them completed by October 2007. By December 2006 I had come out of the interest paying part of my overdraft. By February I had paid off my Dad, and by November I had paid off my car loan. Ok, I missed my target by a month, but I suddenly realised that in 13 months I had saved about £5,500, and it was all about being focused. I mean, I was really counting the pennies! As my Nan used to say, if you look after the pennies the pounds will look after themselves!

Anyway, I was pretty stunned at how successful I had been! Not only had I paid off all these debts, I had also managed to get a pay rise at work. I was de-shackled and it felt great.

Cool, so now my goals looked like this:

Resources:

• Be financially free by the age of 30
• Be out of debt within a year DONE
• Buy a house by the end of 2008
• Save £500 a month towards a deposit

I was renting at the time and this is not good. Hundreds of pounds going to someone else for them to pay their mortgage off while the property I lived in increased in value! Anyway, renting vs buying is another post!

Within the year I had purchased my first property!

Job well done!! So within two years I had now cleared my debts and was paying a mortgage! Brilliant!!! This goal setting malarkey was doing me proud.

Now… my goals looked like this:

Resources:

• Be financially free by the age of 30
• Be out of debt within a year DONE
• Buy a house by the end of 2008 DONE
• Buy or create an asset that generates at least £100 per month cash flow by the end
  of 2009

And this is where it all got REALLY interesting!! I’ll tell you about asset building in the next post!

Anyway, in conclusion, setting goals and writing them down means you are much more likely to achieve them. Set a life goal, something that you can always strive towards but never reach. Then, break it down into smaller and smaller MEASURABLE goals until you hit an action point. Do this by keep asking yourself “how can I achieve this?” Like, how can I get out of debt within a year? Well, I can make sure I only spend £75 a week on myself. And there is your action point – to only spend £75 a week on yourself and use the rest of the money to kill the debts.

Asset building ideas coming up next time!