Move Beyond Positive Thinking and Make Your Investing Goals Realistic

This Morningstar‡ report was first published on March 10, 2023.

Our goals represent the manifestation of our dreams, whether that be saving enough money to have a well-stocked emergency savings fund, having enough for a down payment on your dream home, or even just finally going on that expensive vacation. However, no matter how passionate we are about our dreams, too often they get pushed to the wayside or thrown into the gutter. What can we do to persevere? Well, for starters, we can look to psychology.

The negative impact of positive thinking

Research has pointed to two key procedures to help increase goal commitment and performance:

• mental contrasting
• implementation intentions

Mental contrasting is the process of imagining your desired future and then identifying obstacles in your present reality that block the realization of that goal. In other words, this process prompts you to reap the benefits of achieving your goal but then forces you to face reality. This may sound cruel, but this process can activate your desire to attain that goal, prompting cognitive, emotional, and behavioral changes. In comparison, just letting yourself daydream about reaching your goal allows you to feel like you've already attained it, prompting low energy, effort, and success.

Implementation intentions are a natural next step to mental contrasting. To put it simply, implementation intentions are if-then plans. For example, “If I face obstacle X when striving toward my goal, then I will do Y to mitigate any negative impact toward my progress." Once a person has identified the obstacles they face, they can create a plan to prevent those obstacles from derailing their progress when they inevitably arise.

A research-based strategy to help you stick to your goals

Combining these two procedures, experts in the field have developed a four-step strategy to help increase goal commitment and performance via nonconscious cognitive and motivational processes — Wish, Outcome, Obstacle, and Plan, or WOOP:

1) Wish: To start, imagine your wish. This should be a goal that is challenging but still within reach.

2) Outcome: Next, imagine accomplishing that goal. In a few words, write down a few good outcomes of achieving this goal.

3) Obstacle: Now, it's time to bring things back to reality. Identify a few obstacles that are blocking you from fulfilling that wish.

4) Plan: With those obstacles in mind, create a series of if-then statements to help you prepare for those obstacles before they happen.

As an example of this process in action, consider the following:

1) My wish is to save enough for a sizable down payment for a car in a year.

2) My best possible outcome is driving around in a 2023 Range Rover SE by next winter.

3) My obstacle is, naturally, overspending. Here are a few if-then statements I can use:

• If I overspend one month, then I'll save extra funds the next month by immediately putting money directly into my savings account when I get paid.
• If I overspend on dining out one month, then I'll suggest planning potluck nights to help cut costs.
• If an emergency pops up one month, then I'll increase my saving amount for the following months and, if necessary, consider shifting my timeline out by one month. (Having some flexibility is good!)

Dreams into reality

To sum up, dreaming about achieving your goals is fun, but it can actually hurt your progress unless you proceed by acknowledging present-day obstacles. Following a guiding process, such as WOOP, can help you move past your dreams and make them a reality.