Pillar 1. Setting Clear and Achievable Goals
Athletes set clear and achievable goals to improve and maintain their skills on a variety of timelines. There are two main kinds of goals called process-oriented and outcome-oriented. Process-oriented is like saying “my goal is to stretch for 15 minutes three times a week” and outcome-oriented goals might be “I want to win tomorrow’s game.” First, they set short-term goals for themselves which range from day-to-day to the end of the month. These are smaller, realistic goals which will compound and bolster their long-term growth while making meaningful progress in the short term. Second, athletes will set intermediate-term goals which range from a monthly timeline to the end of a year. These might include working towards a difficult skill or winning a certain tournament. These are meant to keep the athlete motivated while still having an eye on the big picture. Finally, the long-term goals are the culmination of everything the athlete has worked on like winning the gold at the Olympics. As an investor, you can have similar goals that help guide how you plan for retirement. For example, “I will put 15% of my paycheck into my 401k” is a short-term process-oriented goal and “I want to have enough money to last my retirement” is a long-term outcome-oriented goal. Having goals is so important because research by the American Psychological Association revealed that participants had an average reduction in financial anxiety of 16% after a single goal planning meeting.i If you continue to check up on your goals, then you will be more confident in your future.
Pillar 2: Staying Disciplined
Training is often more intense for athletes than the actual competition because they want to be comfortable playing at a higher level than they need so that they will have the energy to play no matter how intense the game is. They train the physical, the technical, and the mental aspects of themselves. If an athlete leaves out one part of their training or does not stay consistent, they run the risk of having their weakness exposed. Athletes need a wide range of abilities just like investors need a diverse portfolio to help reduce overall risk.ii It is easy to want to hop on a trend and put all your money into a meme stock but as an investor, staying as disciplined as an athlete helps to ensure that success is more likely.
Pillar 3: Openness to Coaching
Coaches are an integral part of an Olympian’s team because without them they would lose sight of how they need to be training. A good coach acts as a guiding hand but knows when to step in and set the athlete straight. Without a coach, the athlete would be lost and would not be able to achieve their full potential because an outside perspective can see so much more than just the athlete. Financial advisors are just like coaches because of their experience and ability to help guide investors toward reaching their goals. With periodic financial reviews and adjustments, you can stay on track and ensure your financial plan remains relevant and aligned with your goals. Having the outside perspective can take so much weight from your shoulders since you know you can rely on them. If your firm is a fiduciary, then you can be 100% sure that they will act in your best interest no matter what happens because of their fiduciary duty.
Pillar 4: Testing and Re-evaluating
Athletes at all levels, not just Olympians, test themselves at regular intervals to see how much they improved at the 100-meter dash or the standing jump. This gives hard data to evaluate how the current method of training is working for you. If it works, then you would only have to make small adjustments, if at all, to make sure you reach your goals on time. If not, it would be time to overhaul training and find a way to reach your goals on time. Financial advisors make sure to have financial reviews to stay on track with your financial goals. From there you can evaluate the next steps and start to make new goals if you were able to achieve any. However, doing these checkups too often can be stressful for many people because of the ups and downs of the market. It is very easy to lose sight of the long-term goals you have in mind when every day you are checking your account and seeing fluctuations. Athletes have on and off days where one day they might set a personal record but then the next their body and mind are not in it. Olympians realize this is a part of the process and reset for the next training. Similarly, you must accept that there will be good days and bad days, so finding ways to keep yourself from getting stressed is important. Talking to your financial advisor can help you maintain a long-term perspective.
Pillar 5: Overcoming Adversity
Athletes endure many challenges on their road to the Olympics such as injuries, bad calls, and poor sportsmanship but the people who are above the rest know how to bounce back from these challenges. Staying mentally strong is the most important thing in sports because it is so easy to fall apart and forget your training. Even if for a split second you falter, you might be at a disadvantage. So, learning to accept that obstacles exist, and you will have negative thoughts and accepting them is the first challenge. Novak Djokovic, Olympic tennis champion, describes his strategy as learning to not stay in those thoughts for too long.iii When investing, there will be market volatility and economic downturns but there will also be booms and major growth. So, you must learn to not let yourself stay in a place where you are constantly anxious about your finances and return to the long-term growth mindset. Again, leaning on your financial advisor can be a helpful way of returning your focus to the long term since you already planned for the short term.
Pillar 6: Achieving Gold
When athletes finally achieve their long-term goals and find success, their joy is unmatched. Even the best take a day or two off to celebrate themselves because of all the work they put in. When Olympians win gold, so many break down in tears, run to their team and their family, or just lose themselves in the joy of victory. In your own way, you should celebrate yourself and the victories you achieve in planning your financial future. It is important to reward yourself now and then because if investing becomes a weight on your mind, it is difficult to enjoy the process, and you might start to avoid it. But if you reward yourself, staying true to your goals can become a habit. There is no better habit than preparing for your future.
Conclusion
No matter where you are in the process of saving for your future, you can take something away from the mindset that athletes have. The Olympics is a time where people can show to the world who they really are through their sport. Having achievable goals, staying disciplined, learning, benchmarking progress, overcoming adversity, and rewarding yourself are some ways that athletics and investing have similar winning mindsets. Financial planning should consider every part of your life and your finances so you can put your all into your future. Anything worthwhile requires dedication, strategy and support. Even if you feel confident in your process, maybe consider taking a few notes from the greatest in the world.
i https://link.springer.com/article/10.1007/s10591-019-09501-0
ii https://www.investopedia.com/investing/importance-diversification/
iii https://www.youtube.com/watch?v=iBxprBcvpSA
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