In the investing world, it is typical for an investment manager to have their performance compared to a benchmark. A benchmark serves as a neutral measuring stick for potential investors to compare the success or failure of that investment manager. If the manager has worse returns than the benchmark, a conclusion is drawn that they have ‘underperformed”, while if they have better returns, the conclusion is that they have ‘outperformed’.
How do you measure your personal underperformance or outperformance when it comes to reaching your financial goals? At Master’s, we believe your personal benchmarks should be much different than those of an investment manager. That is, they should be personal to you. However, if we do not do the work to truly explore what our personal benchmarks should be, we may get wrapped up in benchmarking against things that don’t ultimately define success or failure for our personal situation.
Some of the benchmarks for financial success we may use without a proper discovery process would be:
- The investment returns of our neighbor, friend or day-trading co-worker.
- The things (cars, houses, vacations) others have that we don’t.
- The perceived happiness of another vs. our own.
- An arbitrary market measurement like the S&P 500.
None of these benchmarks will dictate the success of your personal financial goals. If you got better returns that your neighbor, but didn’t reach your own personal goals, I am sure we would all consider that failure. So instead of benchmarking to what is around you, you can ask some questions of yourself to discover what benchmarks will point you to success that is meaningful to you, such as:
- Why is money important to you?
- If you knew you only had 6 months to live, how would you spend your time differently?
- In what moments do you feel most content? Who are you with, what are you doing and where are you in those moments?
- What would you have wanted to accomplish in 1/3/5/10 years to consider them successful?
We are privileged to be able to walk with you as you explore and uncover your personal benchmarks and look forward to celebrating with you when you ‘outperform’ them!
So, what new benchmarks will you establish to measure your success?