Benchmark Your Life

Defining and attaining your own success and happiness

As we head into the new year, I want to share one of my professional goals for 2018. It’s to write on a regular basis to share my thoughts on financial fitness and how it ties into our mental and physical health. I’m sharing with you to strengthen my commitment for the upcoming year. So if you don’t see fresh insights every couple weeks or so, reach out and keep me accountable! It’s what I do for my clients, and I’d like you to do it for me.

I can think of no better way to start than digging into success and happiness and how we define and accomplish each. This time of year, everyone is enjoying the holiday season, tying up loose ends at work, and getting ready for 2018. For many, it’s a time for new year’s resolutions and goals, which is where our quest for success and happiness has to begin.

My Purpose

I think the diagram to the right does a great job of defining exactly what purpose is, or at least should be, for most people. For me, at the center of that diagram is helping people define and attain their own success and happiness, which I accomplish through my career as a financial planner. In fact, the CFP Board, a non-profit organization that sets professional standards and oversees the Certified Financial Planner ™ designation, defines financial planning as “the process of determining whether and how an individual can meet life goals through the proper management of financial resources.” However, in the beginning of this process, most people have difficulty even articulating what those life goals are. My own definition of financial planning would be “the process of helping individuals develop life goals, and determining whether and how they can meet those goals through the proper management of financial resources.”

Where does financial fitness come in? As an avid gym-goer, I understand that physical fitness is an active state of being, rather than a point that is reached. When it comes to our personal finances, we should have the same mentality. This leads to a final iteration of my purpose, financial fitness, which I define as “the ongoing process of developing and modifying life goals, and determining whether and how we can meet those goals through proper management of financial resources.”

Benchmarking Our Investments

It all begins with goals. When it comes to investment management, a manager will typically set a benchmark. It is often an index, like the S&P 500 or the Russell 2000, that matches the characteristics of the portfolio they intend to build for the client. A manager will compare their portfolios performance against this benchmark, which serves as the goal, in hopes of matching or beating the benchmark.

At Patriot, we have a disciplined and fundamental investment philosophy. We use low-cost and well-diversified index funds designed to track segments of the market instead of trying to beat them. These segments are represented by benchmark indices. You can see significant evidence behind this approach in the most recent SPIVA study (Standard Poor’s Index Versus Active), which shows at least 93% of all U.S. equity managers under performed their benchmark over a 15-year investment horizon. It also shows managers across all international equity categories under performed their benchmarks over 3, 5, 10, and 15 year investment horizons.

With our approach, we set realistic and reasonable goals for our own portfolios, without getting caught up in the news of the day, hot stock tips, or trying to beat the market. We can and should take a similar approach to our entire lives.

Benchmarking Our Lives

How can we translate the purpose of appropriate goals and benchmarks to our lives as a whole?

For one, keeping up with the Joneses is akin to trying to beat the market. I don’t believe it is attainable on a consistent, long-term basis. Anytime we tie our definition of success to a benchmark set by other people, we will rarely be satisfied or happy. Instead, we will always chase someone who has more money, a bigger house, a nicer car, etc. If we truly want to be happy, the only person we should ever strive to be better than is who we were yesterday.

We need to set our own benchmark by identifying and constantly being aware of our goals, values, priorities, and ultimately, what we define as the purpose for our lives. All of these things provide direction for everything we do throughout our lives. If we can identify and constantly strive for those things, then we are better aligning our time, money, skills, and effort.

Ultimately our level of happiness depends on our ability to set appropriate benchmarks. The simplest equation for happiness is reality minus expectation. If we let others set our benchmarks we run the risk of never being able to exceed those expectations, resulting in a reality that leaves us disappointed.

That doesn’t mean we should only set easily attainable goals. It just means we need to set goals that are actually aligned with our own values and priorities. We won’t always meet the expectations we set for ourselves, but that’s okay. Failure is the fog through which we see success. However, I believe having a solid understanding of your own goals, values, and priorities will inherently lead you to success.

So for the upcoming year, my challenge to you is this. Sit down. Identify your goals, values, and priorities. Think about what your ultimate purpose in life is all about (this is determined by you and you alone). Set your own benchmarks for your life. Proactively doing these things will give you a greater sense of control over your own life and your own happiness. The serenity prayer below has always helped me keep perspective on this.

“God grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.”   

I wish you a Merry Christmas and a Happy New Year with lots of success and happiness, however you define those things in your life!