The Psychology of Setting Financial Goals Which Work
Peter McGahan
Monday 9th February, 2026.
THERE is no joy in trying to bend uncooked spaghetti soaked in nitro-glycerine. Resolutions shouldn’t be like that. Set them in February, then all the pressure is off!
For companies or individuals, the reasons behind this common failure are often less about discipline and more about the structure behind the goal itself. When financial resolutions go wrong, it tends to boil down to a handful of common psychological and practical mis‑steps and, just between us, deciding to set goals in February can relieve a surprising amount of pressure.
First up: unrealistic or vague goals. Saying “we want to double revenue this year” or “I want to save loads” sounds noble, but it lacks the structure the brain demands. Without defined numbers, timelines, or concrete steps, the goal remains a hazy dream rather than a plan, and your subconscious boots it out like a two-month-old turkey in the fridge.
The widely accepted SMART goal framework (Specific, Measurable, Achievable, Relevant, Time‑bound) exists exactly for this reason. When a goal lacks structure, it’s as useful as a frying pan with no handles. Tell yourself how much, by when, and for what reason – the why.
Simon Sinek covers that well in his ‘Start with Why’. Go look at that video online.
Then there is all‑or‑nothing thinking. If you miss one budget deadline or overspend on an expense, then suddenly the whole plan feels derailed – the Spaghetti is dust.
Often people treat a single slip‑up as total failure, it’s a classic mental trap, treating one slip-up as total failure. In reality, occasional missteps are not verdicts; they’re just information. Embracing a growth mindset, as championed by Carol Dweck, means acknowledging that lapses are part of the journey. Frame a missed payment as a reminder to tighten the process, not as proof you’re hopeless. It isn’t a setback, it’s a cha cha.
A third trap lies in having goals unanchored to personal or organisational values. If you’re saving money just because a spreadsheet, or someone else, demands you should, motivation will fade. But if the goal aligns with deeper values (your why) maybe financial freedom to pursue a passion, that emotional fuel will keep you going. Psychological frameworks like Acceptance and Commitment Therapy (ACT)
emphasise that value‑driven goals carry far more staying power than imposed targets.
Overestimating the power of motivation is another common error. Motivation ebbs and flows, but habits built through small, consistent shifts carry the real force. Think of what Atomic Habits by James Clear calls “tiny changes, remarkable results.” Rather than committing to a dramatic overhaul of spending habits overnight, begin with modest, manageable changes: a weekly review of expenses; an auto‑transfer to savings after each payday. These small routines gradually build yourself identity of financial prudence. Through small steps we become this new identity.
Don’t ignore how stress and depletion affect willpower. When life (or business) has you in “survival mode”, chronic stress narrows focus. Your brain is busy just keeping you afloat, not planning long‑term investment strategies. Polyvagal Theory and research on your autonomic regulation suggest that feeling safe, grounded and rested gives you the bandwidth to engage in disciplined planning. Without that, good intentions rarely survive.
Behaviour change, even financial habits, thrives in community. Seeing colleagues, friends or family move in the same direction boosts self‑efficacy. According to Albert Bandura, witnessing others succeed, or having someone believe in you, makes a tangible difference. Setting goals solo makes follow‑through harder.
Finally, trying to change too much, too quickly. That overload causes decision paralysis. Too many simultaneous changes can stall even the most motivated planner. Often, picking one small, high‑leverage change is better than a sweeping overhaul.
Now, why February? Because by then you’ve given yourself a chance to breathe. It’s as if New Year’s Day hands you an empty diary full of pressure; by waiting until February, you’re starting with a clean page. The pressure feels less fake, and the process, more grounded. It’s your timeline.
In the end, successful financial goals, whether for a company or personal life, tend to combine realistic, structured plans with small, habit‑friendly steps; they are rooted in values; supported; and gently paced. So, before you scribble “get rich” on a napkin, give yourself a moment. Ask: what exactly you want? Why it matters? And how you’ll inch towards it, one small, steady step at a time.
What to do with your one life? The same thing you’d do if you had two lives, and this was the second.
If you have a financial question, please call 01872 222422 or email info@wwfp.net
Peter McGahan is the Chief Executive Officer of Independent Financial Adviser firm, Worldwide Financial Planning. Worldwide Financial Planning is authorised and regulated by the Financial Conduct Authority.
