Less Goals, More Systems
There’s more than enough motivational blogs so I’m not about to turn this into one, but personal finance is closely related to goals so once in a while it helps to review them. I recently came across a great piece by Scott Adams explaining why systems are more useful than goals. I’ve found this to be true myself.
Some financial goals have repeated themselves year after year for lack of a clear way to actually get there. Recently I’ve cut back on all of that and re-focused on doable next steps. Although the goals are lower, they help direct the action needed to get there and once they are reached I can aim for something bigger. The momentum from consistently meeting and exceeding realistic goals is also a psychological tool that’s literally worth a fortune. Although improving your situation by 30% in a year might not sound like a lot when you’re starting from a low point, that can compound every year just like a 30% investment return would.
When it comes to investments I have no goals related to specific portfolio values, just conservative estimates that I can adjust over the next 20 years. The only goals I do set are related to things I fully control such as how much is added to the portfolio. If you’re struggling with something, making yourself “attempt” it like Scott Adams does might be a good tool too.
Currently I don’t see that being necessary since I’m liable to invest (and work out) a little more than I should if left unchecked. But if you can set up automatic transfers to do what you need every month, then you don’t even need a goal – you just need to avoid crashing the system. This is a powerful tool that I use a lot.
Are your goals closer to wishful thinking of practical actions? Do you have clear steps to get there?