3 Tools to Help You Map Your Financial Goals

Why 3 overused terms are often under-appreciated (and could change the way you think about your investments)

Elis Wadsworth
6 min readSep 17, 2020


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Most of us like a little adventure — maybe an afternoon drive or a summer-long road trip. I don’t think about hopping on a plane these days, but I haven’t lost my love for travel.

I love exploring new places but the one thing I always study beforehand? A map. If I get lost, I always can regain my bearings and navigate to get back on track. I have the tools I need to get where I want to go.

Personal finance isn’t all that different: it is a journey with some predictable moments, and plenty of surprises. It is a journey that requires goal-setting as well as some planning before we head out the door.

There are seemingly endless possible financial goals, like getting out of debt, buying a home, or going back to school. Goal-setting is elementary.

But we need more than goals. Merely having goals is like setting major milestones along an epic road trip, filling up the car and backing out of the garage without ever actually looking at a map (or a GPS route). How, exactly, do I get there? Which way do I turn when I get out of the driveway?

No two people will take the exactly same route — personal finance is, after all, personal, and infused with our values and dreams and goals. But that doesn’t mean we shouldn’t think critically about mapping out our course.

There are plenty of introductory books and articles and I strongly suggest starting with some of those to learn basic terminology. Read up on goal-setting, keeping a budget, and why retirement planning is important. But many of us stall at this stage, not knowing how to actually prioritize our next steps.

Here are three concepts that I find essential in navigating those initial investing choices. They aren’t necessarily radical, but they are frequently misunderstood and, therefore, ignored.

Understanding Risk

Financial literature often refers to “risk” as if it has a fixed meaning. In reality, the concept is actually a bundle of multiple types of risks, some more acute than others. Legal risk, execution risk, currency risk — to name just a few. But the biggest risk? Not having a good grasp of your own, balanced sense of risk. I am perhaps paraphrasing Warren Buffett, who said it better:

“Risk comes from not knowing what you are doing.” You have to be aware of what you know, and what you don’t. No one can do that for you.

If personal finance is a journey, risk is perhaps akin to the vehicle you chose — you may have a different comfort level driving a sedan versus a minibus, and even that might vary depending on how long a drive you plan to take. It really doesn’t matter if everyone else is on a motorcycle, if you are most comfortable in a convertible.

Of course, it is important to know what “the industry” means by this term, though I still maintain that it is far more important to develop your sense of risk. For me, saving for a house was fairly abstract in my 20s, though I was faithfully socking money away. Only when I realized I wanted to buy in the next ten years (which suddenly seemed to be quickly approaching), and I saw that my money was growing very slowly, did it start to click. What does risk mean in light of your age and your goals and your time horizon? Do you think of risk as an on/off button, or as a spectrum?

Baked into the concept of risk is the reality that no one gets it right every time. It means there will be downs as well as ups. How comfortable you are with possibly losing money will depend on how big your savings goal is, how long you have to get there, and your overall experience.

As your experience grows, your risk tolerance can — and most likely will — change over time. Don’t hesitate to revisit your goals and ask yourself if your risk tolerance for achieving those goals has changed.

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You likely know what trade-offs are. To go back to our road trip analogy, if you chose to drive the minibus, it means you aren’t driving the motorcycle or the convertible. An understanding of your own risk tolerance is critical to making, and feeling confident in, reasonable trade-offs. When it comes to potentially making an investment, you should ask yourself, “What is my alternative use of these funds?”

A quick example: let’s say you typically go to Miami once a year for a weekend getaway with friends and you spend — just to use round numbers — $1,000. But this year you see an opportunity to invest in the stock market. Which will you rather do, and what are the benefits (and negatives) of each?

Learning to think in terms of trade-offs will help you clarify what your values really are and what you are willing to give up in order to hold those values. No financial decision is made in a vacuum — and clarifying your values will almost always improve your confidence about an investment decision.

Frankly, there’s much to be said about aligning your values and what you say “yes” to. If you aren’t yet clear on what your values are, try this simple exercise: think of the last time you spent $100 on one item (or experience), and felt really, really good about it. Then ask yourself why? Chances are, that decision was aligned with one (or more) of your values. If you can identify what made that expense feel so good, you are on your way to defining your values.

Compound Interest

Yes, you will need to brush up on a mathematical principle, but no, you won’t have to make calculations. It is the concept that is important. It is worth learning because many investments are best reviewed in relation to one another (again, trade-offs). You’ll want to understand how your money earns money off of itself (often called a “return”). Once you get the basic concept (and can compare it to simple interest), you will be able to apply it to many financial decisions.

Knowing a bit about compound interest is akin to knowing what makes your vehicle run. You may not know the precise intricacies of how your engine works, but you do know not to put diesel in an engine that only runs on unleaded, right? You do know that if you are looking to buy a bike, and the salesman gives you a pitch about how gas-efficient bikes are, you know to shop someplace else! Gas efficiency isn’t the proper tool to measure bicycle performance, though it is a great measure for convertibles and motorcycles.

The other reason it is important to be anchored in this concept is because not all investments increase in value in this way. You want to be able to compare investment opportunities and that means learning to ask questions (how does this make money? And could it lose money?).

Life is a journey and most of us don’t want think about our financial goals constantly. There is a way to make responsible decisions about your finances without feeling exhausted or anxious. Don’t shortchange yourself and ignore these foundational tools. Laying out a thoughtful roadmap for yourself will help you navigate, and will give you the tools you need to change course over time.



Elis Wadsworth

Curious New Yorker, avid reader, writer, investor. I think a lot about the value of work. Currently cultivating a spirit of wonder-wander from inside 4 walls.