Blasphemy! | The Case Against Setting Financial Goals

by RJ

in Psychology

Despite what you read, there are downsides to goal setting.

  • Goals can place limits.
  • Goals can make you unaware of short-term opportunities.
  • Circumstances change frequently. But the goal you set, will tell you to persist, even if it’s not in your best interest today.
  • Tendency to set goals not for yourself, but for others.
  • Goals encourage you to live in the future. How many times have you completed one goal, just to set another?

Can No Financial Goals be a Reality?

The question is can you go through life without financial goals?

This is going to sound crazy after what I just wrote, but no. I can’t think of a scenario where someone could go through life without setting at least a few financial goals. This isn’t to say the standard financial goal process doesn’t have room for improvement.

For example, take retirement planning. How would one save for retirement without a goal? Honestly, I can’t think of a way. The process of calculating your income needs and then figuring out how much you need to save today has its faults, but works.

But should this same process of calculating your needs, be used for all goals? Even short-term goals?

For example, you have a short-term goal to save $2,400 for a dream vacation in two years. If you used the retirement saving process for this goal, you would find that you need to save $200 a month for the next two years (assume 0% interest for simplicity).

With the ease of online banking, you could schedule a transfer for $200 a month from your direct deposit into an account specified for your goal. Essentially, you can forget about your goal until two years from now, when the money is saved. This strategy is recommended in just about every personal finance book and blog, including here.

But here’s the problem with “automating” your finances–you’re blinding yourself from opportunities that today brings.

Instead, what if you asked, “How can I afford this now?” Just a few minutes of brainstorming and I can think of many different ways one could afford a dream trip by the end of the week.

Possibilities include…

  • Sell belongings to pay for your plane ticket
  • Couch Surf or volunteer somewhere for a free room
  • Reallocate $500 you were saving for a new car, into your vacation fund, now that your priorities have changed
  • Look for a part-time job at your destination to pay for food
  • Use points to pay for plane ticket
  • Choose a cheaper destination because maybe it’s the experience of something new you crave

My point is that what you put off for two years could probably be had today. All that’s required of you is a little creativity.

Pay Your Values First

The idea for this post hit as I was on an eight-hour flight home from Amsterdam.

The trip was unlike anything I’ve ever experienced. Mostly due to the fact, that from the time I got the idea to go, to the time I got on the plane was less than 18 hours.

What really surprised me was how cheap it was. My wife and I were able to spend eight days in some of the most expensive parts of Europe (Amsterdam, Brussels, and Antwerp) for less than most people pay to go to Mexico (Some travel hacking was involved).

On the plane ride home, I started to think why I was blocking myself from taking a trip like this. It wasn’t long until I realized that the process I went about setting my financial goals, was a factor.

You see, for over a year I’ve been saving for a trip to Peru. In order to save for this trip, I used the same goal setting process I always use. I defined my goal, estimated the costs, and decided how much I needed to save per month to reach this goal. I then set up a sub-savings account that withdrew money every month from my savings account. The nickname of this account was actually called Peru.

Essentially, I put my brain and my finances on autopilot.

What I realized on the plane ride home, was having a well-defined goal, was causing me to miss once in a lifetime opportunities like the one I just had.

So I made a simple tweak that I feel has given my financial plan a lot more flexibility. Instead of being so specific with my short-term goals, I now just pay my values first fund. Therefore, no longer do I have an account nicknamed Peru; I have an account nicknamed “Travel”.

Knowing that I value travel highly, I would place a percentage of my income into this travel fund. This way I can go anywhere I want in the world at any time, as long as the money is coming out of that account.

By paying my values first, compared to paying my goals first, I stay inside of my budget but still open myself to short-term opportunities. Also, not having set goals negates many of the other problems with goals setting. Such as:

  • Undoes limits I place on myself, if I’m willing to think creatively.
  • Opens myself up to changing my mind, if a better opportunity presents itself.
  • Prevents me from falling into the trap of completing one goal, just to set another.

What about Long Term Goals?

I’ve only done this for my short-term goals though. In my opinion, the standard financial goal setting process of picking a well-defined end point and finding outhow much you need to save each month to get there, still works best for long-term goals.

The problem with long-term goals like retirement planning is that it’s hard to get creative. It’s not like there’s a Priceline or an option to “just go camping” for retirement planning. It’s pretty cut and dry, what you need to save to reach your goal.

What works best for me is in the short-term I  think about financial priorities, as in paying your values first. In the long-term, I like to set SMART financial goals.

In the Comments

On Wednesday, March 16th, I’m publishing a follow up to this post. Would love to hear your thoughts in the comments on paying your values first vs. picking well defined goals.

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{ 7 comments… read them below or add one }

Pat S.No Gravatar March 14, 2011 at 8:40 am

Interesting. I think you are right. We need some goals, but I’ve never been a big fan of the arbitrary goals like save X dollars per month to retire comfortably, and the like. I think we should all make it a habit of saving as much as we can, to a level where we are still able to afford the things that matter most, while feeling like we are cutting back on other less important things. The self imposed culture of scarcity is all we need to establish, and that is a goal in and of itself.


RJNo Gravatar March 14, 2011 at 10:33 am


I agree with some of what you’re saying. However, I still think it’s better if one actually knows exactly how much they need to save to retire. Without a set destination, you can get in a habit of wanting just a little bit more to retire.

However, for the shorter-term goals, my point was that you’re better just trying to save a % of their income rather than picking a set goal. For example, instead of setting aside $100 a month to travel, you set aside 10% of your income instead.


Afford-Anything.comNo Gravatar March 14, 2011 at 2:33 pm

Absolutely! I think having a “Yes, I CAN afford it” attitude toward life will get you a much more satisfying life.

A month ago one of my close friends asked me to be a bridesmaid in her wedding. I’ve never been a bridesmaid before, and I’ve always wanted to be asked, so I’m honored! The catch: it’s in the Caribbean, on a French island, at a 5-Star hotel. And it’s 3 months away.

Not to worry: I said to myself: “Of course I can afford it! Let’s get creative about the “how”…. ” and then started checking my frequent-flyer miles. After consolidating miles into one airline, and buying things that I otherwise would have bought anyway (like vitamins and toilet paper at places like Target) by linking to the online store through the airlines’ website (thus getting freq-flyer miles for it), I now have enough miles for a ticket!

Here comes the bride(smaid)!


RJNo Gravatar March 14, 2011 at 3:24 pm

Awesome….Perfect example of how to think outside of the box. Have fun at the wedding.


L. Marie JosephNo Gravatar March 15, 2011 at 11:11 am

I could not have said it better. The best example


Levon MkrtychevNo Gravatar March 16, 2011 at 2:17 am

Goals are key in financial planning, even if it’s just b/c they motivate you and allow you to see then end result, even if you can’t see all of the steps you need to take. Obviously, it’s much better to know all of the steps you need to take to reach your short-term and long-term goals, but sometimes we aren’t that lucky. Short-term goals and long-term goals also have to align. It’s terrible when you are pulling yourself in two different directions. Finally, there is some truth to thinking that financial goals stifle you: thinking about your goals too much can take your attention off the here and now, it can distract you form the tasks at hand, some of which can be very lucrative. Set goals, keep them written down and in a nearby place, and then get to work achieving success. Good luck and donate to the Red Cross to help Japan.


Andrew CanwayNo Gravatar March 20, 2011 at 2:57 pm

I have to agree with the way you plan your financial aims/goals- you cannot obtain anything without sacrifice! But considering the way life is nowadays, where you do not have any job security, soaring interests on your loans, I believe that people should get their priorities right. I mean honestly what’s the point of wasting so much money on travel when you could have used that same amount paying back your debt?


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