Trusting the System: Placing Routines Over Goals in the Formation of Solid Financial Habits

Before you set the goal, set up the system; before you go big, do go home, and start small.

When a young woman once asked me for financial advice, I decided to sit down with her and see how I could help – the identity and numbers in this story have been adjusted to protect anonymity. When she pulled her statements out, I discovered that she was on the brink of maxing out her second line of credit, and looking for a bank that would give her a third.

Before even beginning to crunch any of those red numbers, I sat back and asked what her financial goals were – which was a mistake, now that I think of it, and one that is too oft committed by countless advisers out there. I’ll explain why a little later.

“I want to be a millionaire by the age of 35,” she retorted.

She was 33 years old, and working a straight commission job with little success.

I looked down at the statements again. Then I looked back up.

“Maybe you should adjust your goals,” I said. “Maybe you could look at finding work that would provide you with a base salary, which would allow you to establish a steadier income stream, consequently allowing you to hack away at your debt, to build up some savings, and prevent you from obtaining a third line of credit which will prevent sinking into deeper debt.”

At the time, that was the best I could do: propose a reform of life.

And the reason it was a mistake for me to ask about or speak of goals is because, ultimately, I didn’t actually propose any new goals. The goal remained the same: to build one’s personal wealth. But what I actually proposed was the establishment of a system.

I recently read a fantastic article written by James Clear on the formation of habits. The two most impactful takeaways for me were:

1. Don’t set goals, but instead, establish routines.
2. Start small. Very small.

A personal, real life example that James provides is his successful establishment of the habit of flossing his teeth. Rather than saying that by next week, he will have the whitest teeth out of all of his colleagues (establishing goals), he placed a bowl of flossing sticks beside his toothbrush, so that he would remember to floss every time he brushed (establishing routines). And because habits work like snowballs rolling down hills, he started small, and would only floss between two teeth his first week. The second week, he would floss between four teeth. And so on. Now he flosses all of his teeth, every day.

Like the example mentioned above, what good is your goal of wanting to have the most perfect pearly whites, if you’re not even brushing your teeth? Nay, using Coca-Cola for mouthwash?!

Don’t shy away from lofty goals, but make sure you have a map that will get you there.

Confucius did say that a journey of a thousand miles always begins with a single step.

Be patient, be steady, and be consistent.