What if 2021 could be your best financial year ever? And what if the key to achieving your financial goals is easier (a lot easier) than you imagined? Are you on board? We hope so because the tips we’re about to share can be applied to improving any area of your life. If you apply them to money, your finances will improve—even if you set no money goals at all.
Two people, same goal
Mary and Sarah are nurses. It’s the day after Christmas and they’re getting ready to start a shift at the hospital. “How was your Christmas?” Mary asks. “It was great,” replies Sarah, “except that I’m already dreading my credit card bill.” “I hear you,” Mary says, “It’s the only reason I’m working on a public holiday.”
Sarah continues, “When the alarm went off at 5:30 this morning, I said to myself this is the last time we put Christmas on the credit card. I told my husband I want to have $1000 saved for Christmas next year and I’m not working Boxing Day!” Mary agrees, “I’m with you a hundred percent. It’s only $20 a week, right?”
Same goal, different systems
When their shift finishes, Sarah and Mary head home. Sarah logs on to internet banking and opens a no-fee savings account. She emails the bank account details to the hospital payroll officer and asks them to deposit $20 of her weekly pay into the new account.
Mary goes home and finds a big empty Moccona jar. She writes “Christmas Money” on it in thick black texta and shows it to her husband. They each agree to put $10 in spare change into the jar every week. Then they put the jar inside a kitchen cupboard where it will be out of reach from prying little fingers looking for tuck shop money.
Mary and Sarah have exactly the same goal. Who do you think is more likely to achieve it?
The Moccona jar method
The pros of Mary’s method include that she has her husband on board and a dedicated vessel that separates her savings from her spending money. She even has ‘Christmas Money’ written on the jar, which is a great visual reminder of the goal. Mary’s also mindful about keeping her savings out of arm’s reach.
On the downside, Mary’s method relies on both her and her hubby remembering to put their spare change in the jar, a jar which is now hidden in a cupboard. It’s also concerning—given that we live in an increasingly cashless society—that Mary may find she doesn’t have spare change in her purse some weeks.
The set-and-forget system
Sarah’s system is a lot more set-and-forget. From day one, Sarah can sit back and relax knowing that she’s on the path to her goal.
In fact, she only has to remember to save on one single occasion, which is the time she opens the bank account and emails the details to payroll. Every saving event after that is automated.
Like Mary, Sarah will have to practice discipline to resist dipping into her savings, but her system is strengthened by the fact that she can’t spend what she can’t touch.
Sarah’s savings go straight from her pay into an online-only bank account. To get her hands on the cash, Sarah would first need to transfer the money into another account and then go to an ATM to withdraw it. Her kids certainly won’t be dipping into it for tuck shop money!
Winners and losers often have the same goals
This example shows that it’s possible for two people to have identical income, similar expenses and the same financial goal, yet one is more likely to succeed.
The reason is simple, yet powerful: one has a better system.
In his book ‘Atomic Habits,’ author James Clear explains, “Prevailing wisdom claims that the best way to achieve what we want in life—getting into better shape, building a successful business, relaxing more and worrying less, spending more time with friends and family—is to set specific, actionable goals.”
Clear continues, “But I ask you this: if you completely ignored your goals and focused only on your system, would you still succeed? For example, if you were a basketball coach and you ignored your goal to win a championship and focused only on what your team needs to do at practice each day, would you still get results? I think you would.”
We fall to the level of our systems
So, are goals completely useless? Of course not. James Clear believes that goals are good for setting a direction, but systems are better for making progress.
Clear believes that the popularity of goal-setting has led to the development of a false idea that we rise to the level of our goals. The reality, he laments, is that we fall to the level of our systems.
MyBudget founder and director Tammy Barton agrees, “A lot of people struggle with money because they don’t have a system or, if they do, it’s often a jumble of good and bad habits. When you look at them as a total system, they often don’t support the person’s goals.”
Tammy continues, “Actually, I realised that I was guilty of this when it came to reading books. I set myself the goal of reading a new book every month and I wasn’t achieving it. The answer was in my habits. Instead of reading for half-an-hour before bed, I was replying to emails on my phone or scrolling through social media.”
“Since changing to audio books,” Tammy continues, “I’m reading a lot more. Actually, I’m not reading, I’m listening, which makes a lot more sense for me. I listen in the car, on my morning walks, or whenever I have some downtime, and sometimes I get through a new book every week.”
How to design good systems
So, if our goals are only as good as our systems, how can we make sure that we design the right systems?
Here are four foundations. Remember, these can apply to any area of your life, whether that’s improving your finances, health and fitness, relationships, work performance or wherever you want to see change.
1. Little and often
It’s better for a system to consist of repeatable habits that occur regularly and frequently, rather than ad hoc. For instance, if your goal is to pay off your credit card, it would be better to set up a recurring payment of $50 every fortnight, than $300 every three months. Going to the gym on the same set days of the week is another good example. Once you’ve adapted to the routine, sticking to it becomes easier.
Question: What activities are you doing irregularly or ad hoc that you could transform into a frequent, predictable routine?
2. Automate or streamline
If a task or activity can be automated, do so. When it comes to saving or paying down debt, set up an auto-transfer between accounts or a direct deposit from your pay. The less you have to think about, touch, or interact with a system, the less chance it has of breaking. Technology is great for automation, but so is the simple act of organisation. For example, if you plan to go to the gym after work, take your workout gear with you so you can go straight to the gym without going home.
Question: What multi-touch activities could you streamline through automation or better organisation?
3. Make good habits easy and bad habits hard
They say that the key to eating less chocolate is to not have it in your home. The same principle applies to money. For instance, leaving your credit card at home on a big night out makes it harder to overspend. Want to make it easier to take your lunch to work? Cook extra at dinner so you always have leftovers.
Question: What strategies could you implement to make good habits easier and bad habits harder?
4. Minimise factors you can’t control
A good system will limit factors that you don’t have control over. In the anecdote about Sarah and Mary, Sarah’s system involves very few variables. Assuming that she continues to work and get paid, her goal will stay on track. By comparison, Mary’s system relies on a lot of moving parts, including ones that are outside of her direct control, such as her husband putting his share of money in the jar – and her kids not discovering it!
Question: Are your goals reliant on other people or lots of moving parts? How could you simplify it?
5. Reverse-engineer your goal
When designing your system, start with your future end-goal and work backwards to the present. If your goal, for example, is to save $1000 for next Christmas, you’ll need to save $20 a week from now. If that’s not affordable, you’ll need to reduce the saving goal or find the money elsewhere in your budget. This is why budgeting is important—it’s the only way to get a full and detailed picture of what’s possible.
Question: Use your budget to explore “what if” scenarios and reverse-engineer your goals—eg. What if I used my tax refund to pay off my car loan? What if I went to Fiji to 10 days?
Fall in love with the system
Believe it or not, with the right system in place, your financial fitness could improve in 2021 even if you set no financial goals at all.
But if you do set goals (holiday? house deposit? date nights? new car? renovations?) and support them with the right habits, you might just find that 2021 sets you up for a lifetime of financial success and happiness.
Need help setting achievable financial goals? Call for a quick chat with one of our friendly money coaches.
Call 1300 300 922 or enquire online.