You don’t need motivation to achieve your financial goals

M1 Team
M1 Team September 22, 2020
three people with backlit shaddows representing their goals and dreams

We get it, you’re scratching your head just reading that title. But hear us out: 92% of people fail to achieve their goals, according to Inc.

Why? Have we been setting the wrong objectives? Do we lack accountability? Would better “rewards” help? Or should we muster up more willpower? 

No, no, no, and no, says Dr. BJ Fogg, Ph.D., the founder of Stanford’s Behavior Design Lab and author of the book Tiny Habits: The Small Changes That Change Everything. The problem, according to his primary research, is that too many people put all their eggs into the motivation basket. In reality, the good habits that achieve goals are sustained on the backs of systems we design and build for our own behavior. Not motivation.

“Here’s the unfortunate thing,” writes Dr. Fogg. “Most people believe motivation is the true engine of behavior change. This kind of thinking is understandable, but it also happens to be wrong.”

In finance, that means our motivation will come and go. When it does, the progress we’ve made toward establishing financial goals will go with it. That is unless we’ve established a fail-safe system to prevent that.

What is motivation?

Experts at Psychology Today say that “motivation is the desire to act in service of a goal.” That’s an accurate description, but Dr. Fogg also says motivation is your worst frienemy. Here are five reasons why:

1. Motivation is complex. The desire to do something can come from one of three places: from inside a person, from the promise of a reward or threat of consequences, or from our environment. To complicate things further, we can have competing motivations that drive us in opposite directions.

2. Motivation is a wave. “I’m sure you’ve experienced this before,” writes Dr. Fogg. “Your motivation crested, then came crashing down. And maybe you blamed yourself for not sustaining it. But you’re not to blame. This is how motivation works in our lives. It happens to the best of us. You are not dumb or frivolous or easily hoodwinked. You are human.”

3. Motivation fluctuates despite overarching aspirations. Some desires don’t fade at all, like the desire to provide for your family, work a job you love, or retire comfortably. The motivation to habitually do what it takes to get there, though, ebbs and flows.

4. Motivation alone cannot achieve success. The aspirations we desire won’t be attained by trying to muster and maintain motivation.

5. Motivation is alluring. Relying on motivation and willpower lays the blame squarely on us. Failing to uphold an inspired mood somehow reflects on us as people, as though losing our drive is a personality flaw.

In finance especially, acknowledging all that motivation alone cannot do frees us up to look at what motivation – when combined with a behavioral systemcan do.

Build your own system

The good news is there’s a better way to build healthy financial habits than relying on motivation. It’s a system of behaviors based on your own creation.

How do we begin building this system? It starts with reclaiming our futures.

“We should be dreamy about aspirations but not about the behaviors that will get us there,” says Dr. Fogg. “Behaviors are grounded. Concrete. They are the handholds and footholds that get you up the rock face.”

This means that the first step to building a behavioral system is choosing the outcome or result we’d like to achieve.

Then, we can get into all the specific behaviors that may help us get there. These can include automating savings for health and retirement accounts at work, scheduling regular check-ins with your portfolio, or going through a checklist before buying or selling stocks. We can make these more specific (or “tiny”) later.

Now, we can rank each behavior by its effectiveness toward achieving our goal and within that ranked order, sort them by enjoyability.

Dr. Fogg calls this Behavior Matching. The hope is to find one or two behaviors that we enjoy that are also effective in moving us toward our main, overarching aspiration. Those are called “Golden Behaviors”. They should jump out at you right away.

For us, Golden Behaviors look a lot like automation or sticking to one financial platform.

At this point, “…you’ll look at the Golden Behaviors and feel optimistic and energized,” according to Dr. Fogg. Those Golden Behaviors are what can later be scaled down to Tiny Habits.

And suddenly, we’re less likely to be in the 92% of people who don’t achieve their goals.

Behavior is everything

According to Morgan Housel, author of The Psychology of Money, an investor’s habitual behavior trumps intelligence and motivation. If we can’t get that right, then our asset allocation, fee avoidance, securities selection, and even tax planning don’t really matter.

Investor behavior is the bottom of a pyramid upon which everything else is built.

“Good investing behavior means understanding yourself and your own goals and risk tolerances so that you can let compounding do its work,” he said on a recent episode of the White Coat Investor podcast. “Because when the market falls 30% like it did in March, or 50% like it did in 2008, if I’m controlling my behavior, then I can remain invested during those periods.”

This behavior is only reliable if our system withholds it through the coming and going of that fickle feeling: motivation. But if those systems are in place, then our habits will influence our outcomes more than intelligence or motivation ever can.

“You can be the best stockbroker in the world, the best economic analyst, a pure genius, have all the mental horsepower that exists in the world. But if you panic in March of 2020, none of it matters,” says Housel. “None of it matters.”

Now that you’ve found your tiny habit (the behavior upon which your system is built) it’s time to find a likeminded community of similarly realistic investors to affirm your new trajectory. Join us on Twitter or Facebook today and share what Tiny Habit you plan to implement.

M1 Finance is not affiliated with Dr. BJ Fogg or Morgan Housel, their books, or other work. We’re just fans.