Once I had some appreciation of the value of financial goals, my first real financial goal was to pay off all of our high-interest debt. It was a very tangible, real goal — a nice short- to medium-term goal for which I could easily track my progress, easily figure out things to do each day to move me toward that goal and achieve success within several months.
From there, I moved onto other, similar tangible goals. I wanted to be completely debt-free — no student loans, no car loans, no anything. That took us roughly a year. Then, we bought a house and I wanted to get rid of that mortgage, which took us about four years by aiming to make at least a triple payment on our mortgage every month.
What happens after that?
After a lot of reflection, I came to realize that my overarching goal was financial independence. I wanted to be able to choose how to use my time without any concern for whether the time and energy spent earned money for me. I don’t intend to just stop writing when I reach retirement. Rather, I can choose to write entirely by my own rules without any worry or concern, need for how that writing earns an income for my family. It also means I can choose to spend my time doing other things without any worry or concern about income.
I’ve come to realize, particularly over the last few years, that this kind of large, long-term life goal is substantially different than the more tangible short-term financial goals I had in the past. It works differently, and it absolutely requires some different approaches. It’s a different, slower track.
Here’s how to find success with long-term goals
1. Develop a system instead of a checklist
With smaller goals, it’s easy to chart out a step-by-step plan to get yourself from the starting point to the finishing point. You can give yourself a clear to-do list, things to do each day, milestones to hit, and so on. That’s a great strategy for goals that can be accomplished in a reasonably short timeframe, like a year or two. Even if you can’t necessarily identify every step from the start, you can usually see what you have to do to unlock those steps.
For bigger goals like financial independence, you have to take a much different approach. You can’t simply sit down and write a checklist for achieving financial independence unless you’re already close to it — and most of us simply aren’t anywhere close to it. You need a system.
A system is a much different way to approach a big goal. Rather than defining a checklist of things to do to get you from where you are to where you want to be, a system is simply a routine of things you do all the time that will gradually move you in the direction of where you want to go.
Let’s compare those two approaches when doing something very tangible, like writing a book.
A checklist-based approach can work. You simply make a list of all of the tasks that need to be done to write a book, break those steps down into little things that you can tackle in some number every day, and then start knocking them off the list.
A system-based approach is different. Rather than focusing on the checklist, you ask yourself what you need to do every day to get closer to finishing the book. You can start by breaking it down just a little, into a few big tasks. Research. Writing a proposal. A first draft. A second draft. Subsequent drafts.
Each of those big chunks lends itself really well to a daily system. In order to do adequate research for a book, you need to simply spend some time every day reading relevant materials, taking useful notes on them and putting those notes into a useful organizational system. That’s your system — every day, you spend some time reading and taking notes on materials related to that topic. An hour. Two hours. Whatever it takes.
With that kind of approach, there’s a lot less need to worry about checklists and milestones. Instead, you just set aside a block of time and grind toward it.
You don’t have to do it every single day, but it needs to be highly regular. You also need to be setting aside some resource — it doesn’t have to be time, but it has to be some resource you’re constantly using to move in that direction. For financial goals, it’s often money, extracted from your normal cash flow.
2. Make sure your system relies on the following three factors
There are some things that are essential for finding success with a long term goal using a systems-based approach.
I identify myself as someone who is financially successful. I am a financially successful person, period. There may be points in my life in which I don’t have a lot of money in the bank, but over time, my efforts will translate into paying off debts, accumulating money and eventually breaking free of financial constraints. That’s who I am. That’s how I identify myself.
At the same time, I don’t measure that identity by the stuff I have or the experiences I’ve had or even by the amount of money in my bank account. It’s much more about how I act every day and the choices I’m constantly making. When I’m facing a spending situation, I consider what a financially successful person would do in that situation. I have put a ton of thought into answering that question over the years. When I have money in the bank, I consider what a financially successful person would do with that money.
It needs to be something you effectively can do forever. If your system is somehow unsustainable, meaning that you can’t or won’t be able to keep this up essentially forever, then that system is going to eventually crash and burn.
For a financial system, for example, you need to be doing things with your money that are sustainable. You can’t accumulate debt to keep it running. You can’t force your behaviors in a direction that makes you constantly unhappy. Those things will eventually break down.
Complete denial of your wants and needs is unsustainable, so paying attention to your wants and needs is vital. If you ignore your wants and needs, you’re essentially doing the equivalent of a binge diet, and you will fail. Those wants and needs will grow and eventually consume you.
A much better approach is to look directly at your wants and desires. Don’t ignore them. Instead, understand them. Don’t use willpower to walk away from temptation. Instead, ask yourself why you want that thing, and give yourself time to answer that question well. Understand what it is you really want because the solution for scratching that itch often has nothing to do with the goal of your system. People want acceptance, companionship, entertainment and things like that. It’s OK to want those things, but it’s well worth it to figure out good channels for them. You can usually get those things without undoing your goals.
You need to be able to tweak things as you change and as the world changes around you. Your desires, goals, values and life situation will change. These changes will often happen gradually, such that you wake one day and realize that you’re working toward a life goal that doesn’t matter to you anymore.
It’s OK to change, but it’s a far better thing to reflect regularly on those changes and tweak your systems so that you’re always moving towards where you want to be going now rather than where you wanted to be going two years ago or five years ago.
Five years ago, my vision of financial independence looked substantially different than it does now. It involved buying a home in the country on a wooded plot of land and going almost off the grid. Now, I’m far less interested in location and much more interested in how I would spend a typical day without the constraints of needing to work to earn money.
With that, the system evolved a bit, too. I’m less interested in the local real estate market than I was. I’m more interested in minimizing the expense of living a day to day life that I enjoy.
3. Use reflection and thought when building the system
As I noted earlier, one of the cores of any good system is identity. I identify myself as a financially successful person building to financial independence. That’s who I am, and that’s the core of the system.
The next step is to ask a key question: what exactly does a financially successful person building to financial independence do? How does that person live their daily life? From that, I start constructing a list.
How does a financially successful person make spending decisions? How does a financially successful person handle their paycheck? How do they handle bills? How do they handle wants and desires and temptations?
They don’t spend money on things that are unimportant to them. They don’t buy things that aren’t supplying long term value. They find ways to enjoy life that don’t require outlaying money. They minimize their expenses in every area of life. They think about how they’re spending money, try to understand what exactly they’re wanting to get for that money in a broader sense, and then look for inexpensive ways to obtain that. They’re willing always to delay gratification and get value out of anticipation. They consistently do smart things with their money, overcoming temptations and impulses.
As you start answering questions about how a financially successful person actually lives their life on a daily basis, some repeatable behaviors start to become clear, and that is the foundation of your system.
A good system for a financially successful person is one centered around making smart choices with every dollar that comes in. That means thinking about where every dollar of your paycheck should go (from the perspective of someone building wealth) and then automating those choices.
Automation is very useful because it means that you don’t have to rely on constant willpower for good financial choices. As I mentioned earlier, relying on willpower alone is a pretty certain route to failure. You can automate savings. You can automate bill payment. You can even automate things like setting money aside for entertainment and hobbies.
Investing is a big part of this automation. Each pay cycle, some of my income is automatically invested a few days after paychecks arrive in my checking account. I don’t have to remember to do it, talk myself into it or convince myself this is a better choice than whatever fun thing I want in that moment. It just happens. The money moves from checking into investments that I’ve thought about and believe in.
A good system for a financially successful person is one that questions using money to satisfy desires. We all have desires, but the financially successful person looks them in the eye and decides if spending money is really the best way to resolve those desires.
For me, developing a habit of questioning all purchases is very helpful here. My exact questions vary from time to time, but whenever I spend money on anything, I ask myself if I truly need it right this instant, and if not, I delay it. This gives me time to reflect on most purchases. I do give myself some money for spontaneous things, but I really don’t need too much.
Another useful element of the system is what I call the “minimally expensive default day.” Unless there is something particularly special about a given day, I aim to keep the expenses for that day as low as possible. This nudges me toward buying store brand household and nonperishable foods, making a lot of my own meals, doing a lot of my own minor repairs and fixes and so on.
Of course, there is some balancing between time and money here, as you can always pay for a service to have things done for you. The challenge here is to make sure you’re not paying excessively for services or products that save time, and to make sure they’re actually saving you time. For example, as a father of three children, paying for restaurant food often isn’t a good deal in terms of saving time, as I can produce a meal pretty quickly at home for a small fraction of the price.
I have other elements of my financial system that are really tied into the specifics of my life like how I parent and what my hobbies are. For example, I’m an avid reader, and over time I’ve managed to direct that passion almost entirely away from the actual buying of books. If I want to read a particular book, the act that’s important to me is the reading of the book (through legal means — I am not a fan of piracy), so I hunt around for it at the library, find a secondhand copy, borrow it from a friend or watch for it during a Kindle sale. The act that matters is the reading, not the addition to a shelf full of books.
In terms of parenting, I find that I’m far better off in terms of connecting with my kids if I give them time rather than buying them stuff. Part of my daily routine with that is to give them each some undivided attention every single day. I find that developing that deep understanding is what they want more than anything, and there’s no need to fill life with surprises, expensive gifts or pricey vacations.
Those examples move into my “systems” for other areas of life, but they certainly overlap with my financial system and my identity as a financially successful person.
4. Accept that some long-term goals are lifelong processes
The thing to remember is that long term goals, particularly ones tied into how you view yourself, aren’t completed in a day or even a year. They are lifelong processes.
My system for achieving financial success boils down to trying to make the average day minimally expensive, automating most of my financial decisions so I don’t have to think about them, and staring temptation in the face particularly when it comes to spending money. Those systems are just part of the bedrock of normal life. They’re things I do every single day. They’re not special, abnormal tasks to be checked off of a checklist. They’re a system.
Each day I live by that system, the more normal it becomes and the less effort it requires. It’s just ordinary life. It’s what I do each day. Having said that, it never required a lot of daily willpower to do it; rather, it just took time to get used to a new normal. If you are finding it to be a real struggle to stick with the system you’ve made up and it’s not just about getting used to a different routine, the system probably won’t stick over the long term. Go back to the drawing board and try to come up with a system that doesn’t require an abundance of willpower each day. A little burst of necessary willpower during the day is fine, but it shouldn’t require you to feel miserable or feel a constant pull throughout the day.
Everyone’s life is a little different. We have different life realities. We have different goals. We have different ways we look at ourselves and idealize ourselves. Don’t just copy my system. Use it as a template for coming up with a system that’s meaningful for you, that’s centered around not just the person you want to be but the person you are, and that doesn’t grind you into the ground doing it every day. Your system is your new normal, and if your new normal isn’t making you feel better on the whole, you’ll never stick with it.
For now, think about the person you truly strive to be in terms of finances. Don’t think of it as “I want to be a financially successful person,” but “I am a financially successful person, just one that happens to be climbing out of a tough spot at the moment.” Start from there and build daily systems and routines that are in line with that vision of yourself.