I’d like to start this article by encouraging you to see money as a goal.
For example, you can set yourself for the next 12 months to make 10.000 euros. It’s the way a lot of people see money.
At the same time, it’s well known that a goal has to be SMART: specific, measurable, achievable, realistic, and in time.
When we speak about SMART goals, we can speak about all kinds of goals, not only financial ones. We can have SMART goals for when we run, learn to cook, or when we want to lose weight.
If you want to start running, you can set yourself to run 20 kilometers in a single running session, by the end of the month. Or you can set yourself to run 100 kilometers in the next 30 days.
If we talk about cooking, you can set yourself to cook a delicious breakfast every weekend morning, for the next 4 weeks.
If we talk about losing weight, you can set yourself to lose 10 kilograms in the next three months.
For each of these goals, we have a deadline, we are specific, and we also have an indicator that helps us measure the goal.
Let’s go back to our financial goal.
SMART for money
When you set yourself to make 10.000 euros in the next 12 months, do you set a SMART goal?
- Is the goal specific? Yes, because you set how much money you want to make.
- Is the goal measurable? Yes, because by the end of those 12 months you can measure how much money you made and compare it to the amount you set yourself to make, to see if you achieved the goal or not.
- Is the goal (easily) achievable? It depends a lot on the resources you have available.
- Is the goal realistic? It depends a lot on the resources you have available.
- Is the goal limited by a timeframe? Yes, because you set yourself to make 10.000 euros in 12 months.
While it’s easy to have a specific, measurable, and in time, it’s difficult to have a goal that’s achievable and realistic. Especially when it comes to money.
If you look at any other type of activity, that doesn’t involve money, things are way easier.
For example, let’s say you want to run 100 kilometers in the next 30 days. In such a case, the allocated resources depend only on you.
In case you set yourself to cook a delicious breakfast every weekend morning, for the next 4 weeks, the allocated resources depend only on you. Instead, if you set yourself to cook a delicious breakfast that should be considered delicious by someone else, things are a bit different.
Therefore, when it comes to money, it’s hard to have a SMART goal because achieving it depends a lot on the resources you have available.
10.000 euros in 12 months
Is the goal (easily) achievable and realistic?
- If, usually, you make 10.000 euros in 3 months, then this is a really easy goal to achieve. In fact, it wouldn’t make much sense to set such a goal.
- If, usually, you make 500 euros per month (a total of 6.000 euros per year), then the difference depends totally on the resources you have available.
- If, usually, you make 50 euros per month (a total of 600 euros per year), then there are high chances you won’t achieve your goal, because it’s not a realistic one.
Two directions to better achieve the financial goals that seem impossible
I believe you have access to at least two solutions when it comes to your impossible financial goals.
- The first direction: you start with what you like doing
- The second direction: you start from the places where money already exists
As I was saying previously, it depends a lot on the resources you have available. Your skills and the people you know are two really important resources when it comes to making money.
Therefore, you can start with what you like doing. Decide yourself on a thing you love and understand what are the skills you need so you can monetize your passion.
Or, you can approach the other direction and start from the places where money already exists. Google says the most well-paid jobs in 2022 are enterprise architect, full-stack engineer, data scientist, and DevOps engineer. Do a bit of research and see what skills you need to have to get such jobs.
Until now we looked at money from a financial point of view. But is money a reward as well?
Neuroscience and money
For a second, I encourage you to see money as a reward.
For all the things you do towards money, you get money. And vice-versa.
But beyond money, if we look at rewards, neuroscience says that:
- When we advance towards our goals, our brain generates dopamine.
- When we don’t advance towards our goals and we can’t get closer to our goals, our brain generates cortisol.
Both dopamine and cortisol are neurotransmitters.
If you want to know what dopamine feels like, think about the last time you set yourself to do something and you did it. The good feeling that you had was because of dopamine.
If you want to know what cortisol feels like, think about the last time you wanted something important to happen and, instead of happening, you ended up being stressed. That feeling of being stressed was because of cortisol.
Our brain sees money as a reward
The salary at the end of the month or the value of the business contract for the next 6 months.
The money associated with our efforts is a recompense and the situation is pretty simple. When we get money, we generate dopamine; when we don’t get money, we generate cortisol.
When you set yourself to make 10.000 euros in the next 12 months, you set yourself a goal. But the goal, taken as it is, is nothing more than an information that doesn’t influence you at all.
Instead, the way the goal is connected to the reality you live in (which is made of the skills you have and people you know), will influence the quantity of dopamine or cortisol your brain will generate.
Therefore, I believe is really important that before any goal you set yourself, especially when it comes to financial goals, to be as honest as possible with yourself and understand if your skills and relationships can help you achieve the goal.
4 things to have in mind when you set financial goals
Everyone wants more money, but sometimes is not healthy to want more than you can have.
If you want to make 10.000 euros in the next 12 months, you’ll be disappointed if, at the end of the year, you realize you only made 6.000 euros. And everything comes down to the goal you set and the cortisol generated by your brain because you didn’t achieve the goal.
Therefore, here are 4 things to have in mind when you set financial goals:
1. Be flexible about the deadline
To have a SMART goal means to have a goal limited by a timeframe. Once you limit the goal by a timeframe, the strictness of time appears.
If you set yourself to make 10.000 euros in 12 months, the monthly average will be 834 euros. But it’s just a monthly average and nothing else.
Maybe, in the beginning, you don’t do everything as you’re supposed to and things start going well from the 4th month. Therefore, you get to achieve your goal, but you’re going to be 4-6 months late.
The worst part when it comes to unachieved goals is how much we punish ourselves.
If your goal wasn’t achieved exactly when you wanted to achieve it, don’t punish yourself. Instead, be happy because you got closer to your goal and you’re close to achieving it.
2. Find a balance
Beyond the goal itself, you should look at your life and understand how many compromises you have to make.
If achieving your goal means that you should work 14 hours per day and not have time for whatever you’re passionate about, maybe you should review your goal.
Money is important, but not as important. Don’t let money blind you.
3. Do small steps
If right now you’re making 50 euros per month and your goal is telling you that you have to make 500 euros per month, don’t give up your goal. But postpone it until you reach 300 euros per month without too much effort.
When you have to make tremendous efforts, you’re more likely to fail than to succeed. And you don’t want to fail. Remember that your goal is to make money, not to quit making money.
Therefore, any small step towards your goal, no matter how small, is important.
4. Constant analysis
The analysis I’m talking about isn’t about the financial side of your goal.
I believe that money is just a result of our resources – the skills you have and the people you know.
Constantly analyze the way you develop your skills and maintain your relationships. If you are good at what you’re doing and are surrounded by people who invest in your abilities, then money is just the result of that.