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Getting Out Of Debt Requires A System, Not Just A Goal

Getting Out Of Debt Requires A System, Not Just A Goal

Every financial guru says that achieving success starts with setting a goal.

I disagree.  While there is some benefit to setting goals, you are more likely to achieve success if, instead of focusing on goals, you have a system. I discuss goals vs systems on today’s podcast. Listen or read the transcript below.

This is our first episode of 2019, and I’ve got a question for you: how did you do with your New Year’s resolutions last year?  How are you doing with your New Year’s resolutions this year?  If you’re like many people, you’ve probably already given up.

If your goal is to get out of debt or to save more money, you might be a little frustrated knowing another year has come and gone without improving your finances.

So what if your goal this year is to get out of debt? Or save more money? What’s the best way to achieve any goal?

The answer may be to not focus on the goal at all, but instead to create a system to reach that goal. 

Today on Debt Free in 30, I want to explain why, in most cases, systems are better than goals. 

This isn’t my idea.  Scott Adams, the creator of the popular cartoon strip Dilbert, wrote about it in his book How to Fail at Almost Everything and Still Win Big. It’s a great read, funny as well as informative. I’ll put a link to it in the show notes. In the book, Scott Adams says that if you want to achieve success, you need to focus on the system, not the goal.

I agree. So, why am I against setting goals?  Why don’t I like new year’s resolutions? Doesn’t every self-help guru tell you that you have to set goals to achieve success?

Don’t they all say your goals must be SMART – specific, measurable, achievable, realistic and time-bound? Yes, they do, and I understand their reasoning. They all say that you will never reach your destination if you don’t know where you are going. That makes sense, in certain cases. If you want to be a doctor, you have to go to doctor school, and you have to pass exams, so setting a goal of passing the exam makes sense if you want to be a doctor.

But there are problems with goals.  Four big problems, in my view:

1. Goals are binary

First, Goals are binary – you succeed or fail, win or lose. You either achieve your goal or you don’t. And if you don’t, it can stop you from going forward.

I’ll meet with a client, and they’ll say “I set myself a goal of paying off $100 of debt every week”.  Great, how did it work out for you?  Not so great.  The first few weeks went well, but then something happened; my car broke down, I was off sick for a week  – and I had to use the money for that, and I got behind, and it didn’t work so I gave up. 

They had a goal, but they quit after a few weeks because something happened.  You might say, oh but their goal wasn’t ‘achievable’. I don’t think that’s the issue. Putting $100 a week towards debt or saving $100 a week was workable for them most of the time, but life happens.

Think about it.  If your goal is to pay off $1,000 in debt in six months, but you only manage to pay off $500, how do you feel?  You did good; you paid off $500, but since your goal was to pay off $1,000, you feel like you’ve failed, and that’s discouraging, and that feeling of failure makes it more likely that you won’t attempt to pay off more debt in the future.

2. Goals are too specific

And that’s the second problem with goals: they are too specific.  Now I know, all of the self help gurus will tell you that a goal has to be precise to have any value; the M in SMART is Measurable; you need a precise target to aim at.  But do you?

Let’s say that I want to retire early and travel.  The gurus will tell you that that is not a precise goal.  When do you want to retire?  Age 50?  55?  60?  And where exactly do you want to travel to?

But does it really matter if you retire at age 59 or age 60?  Are you successful if you retire at age 59, but a failure if you are still working at age 60?  How can you be so precise with a goal so many years before retirement?

And that leads me to the third problem with goals:

3. Goals can conflict

Goals can conflict – achieving one goal might mean failing at another.

What if you had two goals:

  • To keep an emergency fund of $2,000
  • To save $3,000 for your next vacation

Your car breaks down, so you dip into your emergency savings for $1,500.  But now what? Which takes priority, replacing your emergency fund or continuing to save for your trip? Having those two very specific, SMART, goals doesn’t make that decision for you. From a pure goal perspective, you can’t meet both. So technically one goal fails.

4. Will achieving your goal help you accomplish what you want to do?

And that brings me to the final problem with goals: achieving a goal may not really accomplish what you want to do.

Let’s say my goal is to lose weight.  Is it really your goal to lose weight?

No, what you really want to do is get healthier, so you can play with your kids and grand-kids.  Or you want to look good in a pair of jeans.  Losing weight is not the real objective, and losing 10 pounds may not actually achieve what you want.

If you want to be in good enough shape to run around with your kids and grand-kids, what you really want to do is get in better shape, build up your cardiovascular system, and become stronger.  Losing weight may help, but it’s an imprecise target that doesn’t really accomplish what you want to do.

So, if goal setting can’t help you get out of debt, what can?

The answer is: you need a system. 

A goal is the destination, it’s the aim or the desired result. A system is a set of principles that, when working together, help you achieve your goal. I believe that having the right system in place is far more important than the goals you set. Best of all, a good system is one where you can “set it and forget it”, just like that guy on the old TV commercials.  It doesn’t take willpower, or thought, or constant work.  You just do it.

That’s the key point, so let me emphasize that point again:

A good system requires very little willpower or thought. You know the best system ever invented?


You don’t think about it, you just do it. Now, you’re never going to come up with a system as good as breathing, but that’s a great example of a great system: it works, and you don’t have to think about it.

Let me give you some examples:

A goal would be “I want to lose 10 pounds in 10 weeks”.  That’s a goal that is specific, and measurable, and may even be achievable, but to do it will take a lot of willpower.  You’ll need to change your diet, or count calories, or go to the gym at 5:00 am every morning.  That doesn’t sound achievable over the long term to me.  And why do you want to lose 10 pounds?  Why not 12?  Or 8?  Losing weight isn’t really your objective; you want to feel healthier, and look good, and have the energy to play with your kids or grand-kids.

So instead of a goal of losing 10 pounds, how about you have a system.  Here’s a system:

A system would be to mix in exercise during your normal daily routine.

Park your car at the far end of the parking lot.

Get off the bus one stop early, and walk the rest of the way.

Take the stairs, not the elevator.

The beauty of a system is it doesn’t require very much thought or willpower.

If you always park your car at the far end of the parking lot, and you park in the same place every day, there is nothing to think about.  If you always take the stairs, there’s nothing to think about.

Now I’m not saying that parking your car at the far end of the parking lot at work, or getting off one stop early on the bus, or taking the stairs, is going to turn you into an Olympic athlete.

It won’t. But it will improve your health, and because you don’t have to give it a lot of thought, you’ve got a very good chance that you’ll achieve your objectives.

So how can you set up a system to help you manage your money better?

The most important feature of a good system is that once you’ve set it up, it practically runs itself.  Very little ongoing thought is required. So start with some thinking.

You might decide that your basic principles are that:

  • I won’t rely on credit to pay for every day expenses
  • I will spend less than I earn
  • I will put all extra money towards debt repayment (or savings if you have no debt)

These basic principles, unlike goals, won’t conflict.  They will provide you with a set of underlying principles to guide your financial decisions when the unexpected happens.

If your objective is to get out of debt, the most important first step is to not get into any more debt.  So your basic principle that you won’t rely on credit to pay for everyday expenses makes perfect sense. 

So what kind of system can you design so that you won’t rely on credit to pay for every day expenses?

It has to be easy, and require no willpower.  You don’t want to be at the store trying to decide if you should use your credit card or not, because that takes willpower.

Easy answer: leave your credit cards at home.  Lock them away so that you can’t easily get them.  If you are at the store and you don’t have any credit cards, you don’t have to exercise willpower to not use them.

That’s a system.

Of course life changes all the time, but by writing down your basic principles you can stay the course when you have to make adjustments along the way.

That’s the concept.  I’m not a big fan of financial theory; I like practical advice, so let’s keep this practical.

Let’s assume I want to manage my money better, so I decide to set up a bank account for bill payments, and a bank account to use as an emergency fund.  With online banks you can set up as many bank accounts as you want, with no service charges.

You could create a budgeting spreadsheet to track every dollar you spend or save in each account.  For some people, this type of detailed budgeting process works. There’s a good chance, however, that you’ll get busy, you won’t have time to track everything, your budget won’t balance, you’ll get discouraged, and go on a spending spree.

As I said in our podcast talking about the 80/20 rule (one of my most downloaded podcasts ever), you can get 80% of the benefit with 20% of the work. So why not build a system that’s easier to maintain and so much more likely to be successful?

Here’s how:

Automate everything and do it in small increments. 

There’s two parts to that statement – automating your bill payments isn’t new, a lot of financial experts recommend automating your bill payments and savings. But I’d like you to go a little further with your system – break this down into segments that match your pay period.

As I discussed in Chapter 17 of my book, Straight Talk on Your Money, instead of trying to pay your $100 hydro bill on the 21st of every month when the hydro company says it’s due, why not split it up.  You get paid every week, so why not go into your online banking program and pre-program a $25 payment every week, on your payday.

That’s an easy system, because it happens automatically. You check it every few months to make sure the amounts are correct, but other than that, it’s set it and forget it.

And here’s the best part – this simple system works within the principles you set to achieve your mission of being debt free.

With automatic payments you can’t forget to make a payment which reduces the chances that your balances will grow.

You pay down balances when you get paid which helps you spend less than you earn. This system prioritizes bill payments, not more spending.

As an added benefit, if you get paid weekly, there are four months every year where you get an extra week’s paycheque, so if you keep making payments every week, at the end of a year you will have overpaid your hydro bill by one month.  You can take a month off from payments, and use that extra money to pay down debt, or put it into savings.

That’s a great system; you have extra money, and it took zero willpower or thought to do it.

You can use the same automated process for everything – credit card repayment, savings, emergency funds, retirement planning. 

Here’s my point: goals alone aren’t enough to achieve success.

If you want to achieve a very specific objective, goals are fine, but there is no wiggle room; you either succeed or fail with your goal, and failing at a goal can lead to discouragement, and leave you worse off than before you set that goal.

With a system, you don’t succeed or fail, you just make continual improvement.  Even if you have an unexpected expense and you get a bit off track, you are still moving in the right direction.

So decide on your basic principles, like getting out of debt, and then create a system that allows you to get where you want to go without having to think about it every day.

For me, I like a system where every few months I review my basic principles, and then I sit down at the computer and pre-program all of my bill payments to come out every payday.

If you get paid every two weeks, pay half of every bill every two weeks.

If you want to pay down debt, pick the debt you want to pay off first, and pre-program a payment to that debt every payday.

If you want to save for Christmas, or a vacation, or a new car, pick the amount you want to save, set up a bank account for those savings, and pre-program a transfer to that account every payday.

If you wait until you’ve paid all of your other bills to pay down debt, it will take a huge amount of willpower to use your remaining dollars to pay down debt, instead of buying something nice for yourself.  If your system is to pre-program it in advance, no willpower is required.

If you want to stop using your credit cards, cancel them, or lock them away, or reduce the limit.  That’s a system.

There are lots of practical ways to do it; the key is to pick a system that you can implement now, and that won’t require any willpower or extra thought to implement.

So decide on your basic principles, like getting out of debt, and then create a system that allows you to get where you want to go without having to think about it every day, or use a lot of willpower.

If your mission is to get out of debt, the goals are just the math that dictates how much and when. 

It’s the system that dictates the how. 

It’s the system that keeps you on track. With a good system you are much more likely to succeed.

The specifics are up to you.

Similar Posts:

  1. 7 Reasons Why Budgets Fail and How You Can Succeed
  2. Why Budgeting is a Bad Idea
  3. How To Minimize Debt as a Millennial
  4. Top Five Things To Do With Your Tax Refund
  5. Five Money Lessons Your Father & Grandfather Knew

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