Using Economics To Set SMART GOALS
By now everyone is familiar with the concept of setting SMART goals, which are; Specific, Measurable, Attainable, Realistic and Timely goals. You set out something you want to achieve, you find a way to go about achieving that something and you work towards it and then you assess, it’s as simple as that. there are some economic principles that will prove beneficial when developing your goal plan
This concept stipulates that; there is no win-win in any situation. Whatever you decide to do, you forgo on having done something else. Economics has been known as the dismal science. This principle tells us that everything we do comes at a cost. The cost is losing out on the benefits of having done something else instead. This can help you in setting your goals as you are able to track what sacrifices you are making to get to where you want to be. Do not do things in vain as everything you do is parallel to something else.
Choosing to train early in the morning has cost you your sleep, so make it worth your while that you see your training through to the end. Starting your own business has cost you the comfort and luxury of a steady pay check. When you realize what a sacrifice what you are doing is, you will find the discipline you need to keep at it even when you don’t feel like it.
These are costs that have been incurred and cannot be recovered in any way. This was inspired by the saying “do not cry over spilt milk.” This is basically a non-refundable deposit on your life. This principles states that, sometimes, there are just losses that you must face and move on. How can this help you when achieving your goals?Well for one, it stops you from living in the past or having too much regret to do anything else. We all have regrets about something in our past or a decision we made without much insight, its all fair and well but the problem is born when we dwell in there for way too long. there is no point in regretting having eaten that cheese cake, the only thing you can do now is make the best decision today.
This also helps you let go of things, people and relationships that have reached their expiry date. Some people keep using their resources on a project that is dead in the water all because they have invested way too much into it. you need to learn to discern the sunk costs in everything you do so that you are able to preserve your time and talent for only your optimal use.
The law of diminishing returns
This economic principle states that, as investment in a particular area increases, the rate of profit from the investment, after a certain point, cannot continue to increase if other variables remain constant. The principle was designed for production and manufacturing houses but this is very much applicable to our everyday lives.
Most things we do have an optimal point. Meaning at a certain point, the output decreases or may become counterproductive to the intent. This helps with goal setting so that you know how much time, resource and money you can invest in something. If you plan on studying, knowing your optimal studying point is necessary. Some people lose focus past two hours and anything after that is a waste as nothing is being processed, whilst that time could be put to more productive use than studying in a zombie state. A business deal may sound good on paper but at what point is the effort and resources you put in optimal and worth your while. What is the break-even point? Answers to these questions helps define the blurred line between persisting or cutting your losses.
Time value of money
This denotes that; there is greater benefit in receiving money now than in a later time. This principle is more corporate finance but can be applied to our everyday rituals. Is it more beneficial to do a task now, with the energy you have for it today than trusting the circumstances will be in your favor tomorrow? When you are working on a goal, timing is everything. When you are time conscience, you will seldom procrastinate or lack a sense of time management. The notion that time today is more beneficial than any futures will make you way more proactive and efficient when you are committed and focused on your goal.
There is no blue print at how to go about life and neither is there a one size fits all recipe. as human beings, all we can do is try to organize the human and life experience as best as we possibly can to map out a way forward. The same can be said about setting a goal for yourself. Maybe this is something that completely challenges you or tests your limit. All you can do is believe to your best ability and make a decision with the information available to you at the time.