In the world of The Economic Man, every decision is made with purpose and precision. When it comes to setting goals, The Economic Man approaches it with the same strategic mindset used in economic planning. In this article, I will give you a guide for setting and achieving goals, drawing parallels between economic principles and personal development strategies. Do I know a thing or two about the topic? I do. Do I put this knowledge into practice? Not as much as I’d like to, or, as I like to say, “coaches don’t play”. But don’t let that discourage you! Grab a cup of your favourite drink, get comfy and follow me along this journey 🙂
Understanding the Economic Approach to Goal Setting
Setting SMART Goals
One of the first steps in setting goals is to make them SMART: Specific, Measurable, Achievable, Relevant, and Time-bound. This means that your goals should be clear, quantifiable, realistic, aligned with your values, and bound to a deadline. By setting SMART goals, you can increase your chances of success and avoid wasting time and resources on vague or unrealistic objectives.
- Specific: Ditch those vague New Year’s resolutions. It’s time to get into detail: instead of saying “I want to get in shape!”, say something like “I want to lose 20 pounds and I will use martial arts and weight training to help me with that”.
- Measurable: You want to be able to track your progress. “Getting in shape” can get discouraging really quickly if you don’t have a way to measure progress. Maybe you want to lose weight, or get a new bench press PR. How can you know where you’re at if you’re not tracking it?
- Achievable: Be realistic. Plain and simple. We tend to overestimate our willpower and energy levels: setting goals like “I’m going to deadlift 685 in 2 months!” or “I’m going to get 40 hours of work on my side hustle!”, while not terrible by themselves, are completely unrealistic if you started going to the gym yesterday or don’t even know what your “side hustle” is going to be at all. If you need to start small, don’t feel bad about it.
- Relevant: This is entirely up to you and where you want to head in the future. In my case, since I do Judo, a relevant goal for me would be “competing in a national-level tournament this year”, not “learning Vivaldi’s Winter on the marimba”. If you want to try new things, that’s great! But, whatever it is that you choose to do, make sure your goals are aligned with your overarching values and strategy.
- Time-bound: You need to set deadlines for these tasks. We all love to procrastinate, which is why having some sense of urgency is crucial to achieving our goals. If there are no constraints to your game, it won’t be fun or enticing. “I’m learning Python” should be more like “I’m learning how to do this thing using Python by the end of next month”.
Setting SMART goals aligns with the economic principles of efficiency and rationality. Efficiency means using the least amount of resources to achieve the desired outcome, and rationality means making decisions based on the best available information and logic. By setting specific, measurable, and achievable goals, you can ensure that you are using your resources efficiently and making rational choices. You should also avoid the pitfalls of bounded rationality, which is the tendency to make suboptimal decisions due to cognitive limitations or biases. Not too optimistic, not pessimistic either: balance is key.
Opportunity Cost: Choosing the Right Goals
Another important concept in economics and goal setting is opportunity cost. Yes, I know it’s everywhere, but let me define it one more time: Opportunity cost is the value of the next best alternative that is forgone as a result of making a choice.
Opportunity cost helps you to choose the right goals by forcing you to consider the trade-offs and consequences of your decisions. Think of it as evaluating the potential outcomes and benefits of different goals, choosing the ones that offer the highest return on investment (ROI). ROI is the ratio of the net benefit to the cost of an investment. For example, if you invest $100 in a course that helps you earn $500 more per month, your ROI is 400%. The higher the ROI, the more worthwhile the investment.
By applying the concept of opportunity cost to your goal setting, you can prioritize the goals that have the highest ROI and the lowest opportunity cost. You can also avoid the sunk cost fallacy, which is the tendency to continue investing in a losing proposition because of the resources already committed. For example, if you set a goal to learn a new language, but you find it too difficult or boring, you should not continue just because you paid for the course or spent a lot of time on it. Instead, you should cut your losses and move on to a more rewarding goal.
Creating a Strategic Goal-Setting Plan
Assessing Resources and Constraints
Once you have chosen your SMART goals, the next step is to assess your available resources and potential constraints. Resources are the inputs or factors that you can use to achieve your goals, such as time, money, energy, skills, knowledge, equipment, etc. Constraints are the limitations or obstacles that you may face, such as deadlines, budgets, competition, regulations, etc. Assessing your resources and constraints is similar to the economic problem of resource allocation. Resource allocation is the process of distributing scarce resources among competing uses or ends. For us, the main resources are time, money and energy, and the main constraint is scarcity, which means that we do not have unlimited time, money or energy to do all the things that we want to do. So, again, you are forced to choose.
By assessing your resources and constraints, you can allocate your personal resources more effectively and efficiently. You can also identify the gaps or shortages that you need to fill or overcome. For example, if you set a goal to start a business, you need to assess how much time, money, energy, skills, knowledge, and equipment you have, and how much you need. You also need to consider the constraints, such as the market demand, the competition, the legal requirements, etc.
Of course, there are ways to get more resources, which can help you explore new activities that were beyond your capacity in the past. If you switch from your 9-5 to a better schedule (e.g. 8-3) or land a better paying job, your resources (time and/or money) will be higher, allowing you for more possibilities: investments, more exercise time, or just more rest if that’s what you want 🙂
Developing a Roadmap for Success
Now that you have your SMART goals and your resources and constraints, the next step is to develop a roadmap or action plan for achieving your goals. A roadmap is a detailed outline of the steps, tasks, or activities that you need to complete to reach your desired outcome. It should also include the milestones, deadlines, indicators, and measures that you will use to track your progress and evaluate your results. It’s a more in-depth version of your SMART goal list.
Developing a roadmap is similar to the economic process of project planning. Project planning is the process of defining the scope, objectives, and deliverables of a project, as well as the resources, costs, risks, and timelines involved. In economics, project planning is used to design and implement policies, programs, or interventions that aim to achieve certain goals, such as increasing growth, optimising processes or cutting unnecessary costs.
By developing a roadmap, you can break down your long-term goals into manageable milestones, similar to how economists break down complex projects into phases or components. You can (and should) also create a clear and realistic timeline for your goals, similar to how economists estimate the duration and sequence of project activities. Moreover, you can establish the indicators and measures that you will use to monitor and evaluate your goals, taking into account all the possible scenarios that you can think of at this stage.
Implementing Economic Strategies for Goal Achievement
Risk Management: Mitigating Obstacles
Once you have developed your roadmap, the next step is to implement your action plan and work towards your goals. However, along the way, you will encounter various obstacles or challenges that could hinder your progress or derail your plans. Therefore, you need to apply the economic strategy of risk management to mitigate these obstacles.
Risk management is the process of identifying, analysing, and responding to the uncertainties or threats that could affect the achievement of objectives. In economics, this is used to deal with the volatility and unpredictability of markets, prices, exchange rates, interest rates, etc. It involves four main steps: risk identification, risk assessment, risk mitigation, and risk monitoring.
By applying risk management to your goal achievement, you can identify some of the potential obstacles that you may face, such as lack of motivation, procrastination, distractions, interruptions and more. You can also assess the likelihood and impact of these obstacles, and rank them according to their severity and urgency. Then, you can develop contingency plans to mitigate these risks, such as setting reminders, creating incentives, eliminating distractions, seeking support… You know best, so make sure to choose whatever measures work for you!
Finally, you can monitor your progress and adjust your plans as needed, depending on the occurrence and magnitude of the obstacles.
Maximising Returns: Tracking Progress and Adjusting Strategies
Another economic strategy that you can implement for your goal achievement is maximising returns. Maximising returns means optimising the benefits or outcomes that you can obtain from your inputs or resources. In economics, maximising returns is the main objective of producers and consumers, who seek to maximise their profits and utility, respectively.
To maximise your returns, you need to track your progress and adjust your strategies accordingly. Tracking your progress means measuring and recording your performance and results, using the indicators and measures that you established in your roadmap. Adjusting your strategies means modifying or changing your plans or actions, based on the feedback and data that you collected from tracking your progress. It is very unlikely that your initial roadmap will stay relevant after a few months, or even weeks, so it is almost mandatory that you take some time to work on what went right and what can be improved, and iterate through your roadmap when you feel stuck.
Reflecting on your roadmap and iterating through it is the best way to monitor and improve your performance, similar to how economists use forecasting and optimisation techniques to predict and enhance the outcomes of economic activities. You can also identify and correct any errors or deviations from your goals, just as economists use error correction models to account for the discrepancies between actual and expected values of economic variables.
Evaluating Goal Achievement and Reinvestment
Assessing Goal Achievement
The final step in the Economic approach to goal setting is to evaluate your goal achievement. Evaluating your goal achievement means comparing your actual results with your expected results, and determining whether you met your goals or not. Evaluating your goal achievement also means analysing the factors that contributed to or hindered your success, and drawing lessons and insights from your experience.
I like to use my initial roadmap here: of course it will be quite different from the most recent version, but going back in time can help you compare the sets of goals, steps and measures that you came up with at the beginning of your journey with those that you have right now. By doing this, you can also see what mistakes you made during planning, and learn from them for your next big goal-setting session.
Evaluating your goal achievement is similar to the economic process of impact evaluation. Impact evaluation is the process of measuring and attributing the effects or changes that result from an intervention or policy. Economists use this tool to assess the effectiveness and efficiency of economic policies, programs, or projects, and to identify the causal mechanisms and pathways that lead to the observed outcomes.
By evaluating your goal achievement, you can assess your performance and results objectively, because we’re all about using rigorous methods and data to estimate the impact of economic interventions. Take your time to celebrate your successes and learn from your mistakes, but don’t be too hard on yourself if you didn’t get 100% of your goals 🙂
Reinvestment: Setting New Goals and Building on Successes
The last economic strategy that you can apply to your goal setting is reinvestment. Reinvestment means using your achievements or returns to set new goals and build on your successes. The same way you can reinvest the interest of a deposit, or the dividends of a share, you can reinvest your goals and tweak them in your next iteration, or you can pursue a different set of goals that are related to the ones you managed to reach. While jumping between activities can seem exciting and motivating, consistency is the real deal here: I’m not saying you shouldn’t try new things, but you should consider sticking to a set of goals for the long term in order to reach a higher level of proficiency or satisfaction with time.
Setting goals is easy, but setting SMART goals and reaching them is hard. However, this set of tools and strategies should help you become better at starting new things and finishing them. Remember: The Economic Man does not give in to instant gratification and short-term goals; he thinks long term and always tries to make the most of whatever he chooses to pursue. Whether you want to start a business, learn a new skill, improve your health, or pursue any other aspiration, you can benefit from the Economic approach to goal setting. By taking these bits of inspiration and applying them to your life, you can increase your chances of success and satisfaction, and achieve your goals faster and easier. I would love to see you thrive thanks to posts like this, so let’s get moving… The Economic Way 😉
- Stanier, M. B. (2022). How to Begin: Start Doing Something That Matters. Page Two.
Cassel, E. (2021). The 90-Day Goals Journal: A Daily Check-In to Stay Motivated and on Track. Rockridge Press.
Gagné, M. (2014). The Oxford Handbook of Work Engagement, Motivation, and Self-determination Theory. Oxford University Press, USA.