A north-star goal: A single well-defined goal that you can look up at, and see if you’re heading in the right direction. All other goals are milestones taking you closer to this final goal.
It comes from the North Star, Polaris, in the sky that you can follow when lost, you can reorient yourself just by looking up. Gaining perspective.
The main benefit of having a north-star is that it is a heuristic that can simplify making hard decisions. If you know this thing is a high priority, and you are struggling to decide between two things, you can say “Does this thing move me closer or farther away from my North-Star goal?” and pick the one that moves you closest based on existing information.
It also begins to build you a why.
North star Example
Something like “be rich” is not well-defined. Like all good goals, north-star or milestone, it should have a Definition of Done. A way to know when it’s finished (so you can celebrate with your loved ones!).
Setting a north star that is not well defined will mean you will chase it forever, vagueness here elevates the goal to unattainable levels. An unattainable goal maximises the distance between you and your goal, making your progress feel negligible.
It will become like running towards the horizon, you can run forever but you will never get any closer.
A logical next iteration may be “be rich enough that I don’t need to worry about money”. Still too vague. How much money is that? Worry is not a binary, on-or-off thing. What degree of financial pressure are you willing to sustain?
To go further in defining this north-star requires some homework, how much cash-flow are you going to need to live the desired life you are going toward. In this there is the implicit real goal you are chasing. You don’t chase the money, you are chasing the lifestyle it can afford you. The issue is only that you have not defined that lifestyle.
defining your dream
Perhaps you need $160,000 a year to pay for a month of vacation a year, private school for your kids, investing in a college fund for them, food and mortgage repayments (made up numbers), plus you really have that thing for caviar and fine wine. Assuming you can achieve the global historical average return of 8% per annum from index funds you would need $2m invested (not investment advice).
This is not taking into account inflation and some years will be better than others so withdrawing 8% every year may not be possible – typically the rule of thumb is a “Safe Withdrawal Rate” or SWR of 4%, leaving you some for inflation and for principal appreciation. Not to mention a little buffer for bad years. We haven’t even spoken about tax.
This means your goal income * 25 will be the total capital required to earn the income you need for the lifestyle you have defined without needing to work.
This is on the topic of “Financial Independence; Retire Early” (FIRE). Something I’ll happily write more about if it interests you.
People often say they want to leave the rat race, to retire early. That’s all well and good, but retire early to do what? Define it.
Weekends are micro-retirements
Think about what you currently do on the weekend when you have nothing required of you. Do you utilise it to the best of your ability and enjoy every moment? Or spend it hungover and bored. Remember that if you retire early, all your friends will probably still be working while you’re free all the time.
Now imagine if all your time was free, there was no deadline of going back to work. Are you a procrastinator (trick question, you’re human, so yes). If that’s how you treat your scarce 2 days a week, how will you treat endless free time? You’ll be mayor of Procrastination City.
Scarcity brings something value. Fully abundant free time needs direction.
Shine a light on the dark corners
There will probably be many unanswered questions about yourself and what you want. But don’t fear them, or shy away.
Look them in the face and try to answer them. Each one helping you understand why you do what you do and what you want to be spending your time on.
This is just one example. There is no reason why your north-star goal needs to be financial. At all. It will depend wholly on what matters to you. It also is not set in stone. I have written before about having strong principles that you hold lightly so that when faced with new information you can re-evaluate quickly to always hold the “best” possible point-of-view.
Different things will be the most important thing at different stages of your life, maybe they will be:
- Your career.
- Or spending time with your family.
- Or mastering a skill.
- Maybe it will be reducing your stress levels and being more mindful.
Whatever it is, as a North Star it will make difficult situations become easy. By reducing their complexity down to one dimension:
Does it move you closer or farther away from your most important thing?
Make a well thought-out plan, but allow it to change. Setting goals is like buying insurance. It is a pain because it brings you no benefit now and requires some kind of sacrifice. However, when you realise you needed it, it will already be too late.