Systems over goals
Small changes, over time, win
Atomic Habits

In his excellent book, “Atomic Habits,” James Clear makes a compelling argument against goal-setting:

“…goals create an ‘either-or’ conflict: either you achieve your goal and are successful or your fail and you are a disappointment. You mentally box yourself into a narrow version of happiness. This is misguided. It is unlikely that your actual path through life will match the exact journey you had in mind when you set out. It makes no sense to restrict your satisfaction to one scenario when there are many paths to success.”

This presents an interesting problem for financial planning. When I first meet a new client, I’m hoping to learn as much as I can about 1) a person’s financial goals, and 2) the obstacles impeding the path to those goals.

But what if the goal is the obstacle? What if the goal itself is creating a constraint on happiness and well-being?

Many things have to go just right for someone to accomplish a difficult goal. Think of an NBA player striving for a championship. In order to win, he doesn’t just need to play well, so do his teammates. Furthermore, they have to stay as healthy as possible in order to play at the peak of their abilities. Factors outside of the players’ control are going to contribute a great deal to whether or not the player achieves his goal.

Furthermore, hard goals take time. The longer something takes to complete, the greater the chance the parties involved are going to change, and the greater the chance the goal itself will change. Hunting a goal that you no longer care about is a recipe for unhappiness.

What is within any person’s control? Daily, weekly, and monthly routines. What takes a short amount of time? Experimenting with a new habit.

If your goal is to save more money, you can start that today, right now. Log onto your bank website and set up a weekly automatic transfer to savings of $5. It might not seem like much, but that’s a system. After one year, you’ll save an extra $260 without thinking about it.

If your goal is to travel more, plan a trip, right now. The trip could be to a town an hour away that you’ve never visited. Put a similar activity in the calendar once a month and see what happens.

“I want to spend less money on taxes” is a common goal I encounter with new clients. By itself, however, that goal is often nonsense. I have met people with this goal who have relatively uncomplicated retirement income. They are paying exactly the correct amount of taxes based on that income. The only way to pay less taxes in their situation is to take less income.

When confronted with the reality of reducing taxes through reducing income, I’ve seen people get frustrated. They blame themselves for missing a past opportunity. They blame the government for being greedy and inefficient. Presented with an insurmountable obstacle and a goal that sounds nice but doesn’t fit their life, they start sinking into the swamp of sadness.

However, rather than taking this goal-based approach, a person may instead aspire to improve their tax-planning. Tax-planning is a relatively easy system to implement. To create a tax planning system, you need to put two meetings on your calendar every year:

1) Between September and December, meet with a tax planner to review the previous year’s income. This will ensure you are taking advantage of tax-qualified retirement accounts to the greatest extent you can. This meeting will also help catch any unexpected increases in income that could cause a tax problem if left unaddressed.

2) After filing taxes, in May or June, schedule time to review your tax return and discuss any potential upcoming changes in income.

These meetings might not save money on taxes this year. But with only two appointments, a person has a system that will likely reduce their lifetime tax bill relative to someone without a tax planning system in place.

James Clear’s point is that while goals are something you do, systems reflect what you are. Systems don’t just lead you towards a specific goal, but they help you better understand what’s important to you. They refine your identity so that you spend more time doing things that matter to you.

A system that you struggle to implement, or derive happiness from, might not be right for you. But by trying that system out you’ve logged that knowledge and can move onto something that works better for you. Find what works and what feels right and see where it goes.

Goals imply that you already know the map of your life and that you are supposed to pick some destinations that either or you or someone else believes to be an improvement over where you are right now. This approach might work just fine. If not, think about small, repeatable changes you can make right now. Then, keep going.

In addition to his book, James Clear also has an excellent (and short) weekly newsletter. You can subscribe here.