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Why I'm Done With Financial Goals


I have lots of financial goals. I always assumed responsible people had them. Save this much, retire by this date, and so on.

But I'm beginning to wonder if goals are overrated. Smart people have argued that they can actually do more harm than good.

In place of goals, a lot of successful people have systems. What's the difference? A goal is a target with an end date. A system is a way of doing things all the time. Scott Adams, the genius behind the Dilbert comic, writes in his book How to Fail at Almost Everything and Still Win:

A system is something you do on a regular basis that increases your odds of happiness in the long run. If you do something every day, it's a system. If you're waiting to achieve it someday in the future, it's a goal.

He gives a few examples:

The system-versus-goals model can be applied to most human endeavors. In the world of dieting, losing twenty pounds is a goal, but eating right is a system. In the exercise realm, running a marathon in under four hours is a goal, but exercising daily is a system. In business, making a million dollars is a goal, but being a serial entrepreneur is a system.

I'd add to this list:

  • Graduating college is a goal, but learning throughout your entire life is a system.
  • Having enough money to retire is a goal, but working in a job you love so much you never want to retire is a system.
  • Beating the market is a goal, but investing in good companies for as long as you can is a system.

Goals can be dangerous because they tempt you to do crazy things to achieve them on time. If your goal is to increase your net worth by 20% in the next year, you might put all your money into the riskiest stock you know and hope for the best, thinking it's the only way to meet your goal in time. That might work. Or it could blow up in your face. Saving each month and investing for the long haul is a better bet. And that's not a goal. It's a system.

We also have to come to terms with the fact that the world neither knows nor cares about our goals. You might have a goal to save $10,000 over the next year, but life could drop a pink slip on your desk next month, and there's nothing you can do about it. You might have a goal to retire in ten years, but life will throw in a bear market nine years from now and even give not a damn. Everything important in finance is random and unpredictable. Goals assume that randomness goes away, and that things will work out on a schedule of your choosing, which they rarely do. As the saying goes, "You plan, God laughs."

Goals also fall victim to arbitrary dates. Yale economist Robert Shiller once noted the absurdity of companies racing to meet one-year earnings targets. "I don't know why people keep using one year earnings," he said. "That is the time it takes the Earth to go around the sun. I don't see any other significance." It's insane to think that a household, business, or government budget is most efficient when squeezed into the time it takes for the Earth to go around the sun. But it's how most budgets are done.

What you want is a system that allows you to be happy and successful, rather than goals that guide your system. For investors, a smart system probably includes:

  • Saving as much as you can while remaining happy from each paycheck, consistently throughout your life.
  • If not dollar-cost averaging, then waiting until attractive investments arise, however long that takes.
  • Having enough cash to handle a job loss or market crash.

And it means avoiding:

  • Price targets.
  • Annual return assumptions.
  • Time-specific goals.

Doing this will probably make you a better investor and lead to less stress -- which is actually a pretty good goal.

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics. 


Read/Post Comments (35) | Recommend This Article (180)

Comments from our Foolish Readers

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  • Report this Comment On April 17, 2014, at 3:27 AM, Interventizio wrote:

    Very insightful article!

  • Report this Comment On April 17, 2014, at 9:15 AM, pondee619 wrote:

    Should I start to be concerned? I recently find myself agreeing with Jon Stewart and, now, Morgan Housel.

  • Report this Comment On April 17, 2014, at 10:18 AM, JamesBrown wrote:

    Clever. I'd add that missing a step in the system is easier to handle than missing a goal. Compare: "Oops, I couldn't save anything this month because of that unexpected car repair," vs. "Oops, my net worth didn't break six figures by December 31 because of that unexpected car repair."

    I'd wager that the first option is less discouraging.

  • Report this Comment On April 17, 2014, at 11:55 AM, Mathman6577 wrote:

    Good article. TMF has a good system as well (borrowing a lot from Buffett and Lynch).

  • Report this Comment On April 17, 2014, at 1:21 PM, MaxTheTerrible wrote:

    While I mostly agree with this article, I think all the problems with goals you described here can be avoided by setting *correct* goals. Correct goal should be the one without any elements that you have no control over.

    For example, my goal could have been to retire in the next 5 years, but there are too many variables that can derail that plan that I have no control over (or only partial control). So my true goal is to save as much money as I can in the next 5 years.

  • Report this Comment On April 17, 2014, at 3:54 PM, TMFSpiffyPop wrote:

    I agree.



    P.S. You rock, MH.

  • Report this Comment On April 17, 2014, at 8:31 PM, BruceBenson wrote:

    Gee, never did much successful planning, did you? ;-)

    Goals without a plan to reach them is not a goal but a wish. Each goal needs a plan, what you call a system, to reach it. They go together.

    Yes, lots of people create goals that go awry, because they don't have a method of reaching them or don't realize they need a method. They just "try real hard" or not at all.

    This is why dieting, exercising, saving, investing and the like are hard. Well, actually here at the Fool we know that investing successfully is actually, boringly, easy. So, by the way, is eating and exercising right, if you follow a good system (which is inevitably, boring).

    For me personally, goals are amazing. I've been successful professionally, financially, healthly ;-), and socially because of setting and focusing on goals. But I always had a "how" that went with any goal.

    I plan to run a marathon next week. I have an 18 week training program I've been following. Did I follow it perfectly? Nope. Will I be able to run 26.2 miles next week? I think so. My fallback plan was to attempt the half marathon if I couldn't stick with the full training. If that had happened, I would not have been as happy, but it would have been fine. So far, I'm on track. I might have to run/walk part of the course, but that -- while not ideal -- would be fine.

    A goal without a system is just wishful thinking. A system without a goal can be drudgery, work without a purpose. A goal and a system to achieve it, nirvana.

  • Report this Comment On April 18, 2014, at 8:22 AM, stockdissector wrote:


  • Report this Comment On April 18, 2014, at 11:33 AM, cooncreekcrawler wrote:

    Thanks for the article. I found it insightful and personally very helpful. I've been "retired" for 2 1/2 years and very depressed for 2 of them. I don't do non-structured piddling well at all. I require meaningful work (a system) to make my life meaningful and to get me out of my head (which can be my worst enemy or my best friend, depending on how I use it).

  • Report this Comment On April 18, 2014, at 4:45 PM, JamesBrown wrote:

    Thinking more about this...

    This article is in line with David Bach's "Automatic" mantra, achieving your financial goals by automating your finances as much as possible. Thus:

    1) "Save more money." This is a generic non-specific desire and will likely never happen

    2) "Have $1000 in savings by the end of the year." Better, but what will you do on December 26th and you only have $256 in savings? Panic? Go in debt? Give up discouraged?

    3) "Automatically transfer $19 from checking to savings once per week." This is a *system*, and will result in ~$1000 in savings after one year.

    Nineteen bucks a week? I've *spilled* more than that some days.

  • Report this Comment On April 18, 2014, at 5:18 PM, corpgov wrote:

    Love it. And don't forget to build participation into your system. "Investing in good companies for as long as you can," is a good system but even better is ensuring your voice if heard by communicating your wishes to the company and other shareowners, voting your proxy and perhaps even filing resolutions.

    Invest only in what you can monitor unless you're hiring help is like don't buy a house that's bigger than you can keep clean.

  • Report this Comment On April 18, 2014, at 5:57 PM, JadedFoolalex wrote:

    I'm surprised that it took you this long to figure that out!

  • Report this Comment On April 18, 2014, at 6:18 PM, bernbern0 wrote:

    Hi Morgan,

    Thank you for another fine article.

    My system is: "Read Morgan Housel articles when they appear!" :-)

  • Report this Comment On April 18, 2014, at 7:08 PM, peesoo wrote:
  • Report this Comment On April 18, 2014, at 7:42 PM, strtcrnr wrote:

    I've never set goals, invested the max I could, flew jets for 40 years, retired at 60. Traveled with my one and only wife numerous trips a year and retired a multi M'air. with a 150k pension. My BEST friend had very specific goals reached them and wanted more more more. Has his own business, working himself to death, and will have to work until hes 70 to meet them. To what end. Life is about the journey, not some magic number you think will last you, because trust me, NO ONE KNOWS WHAT THE FUTURE HOLDS. The only thing I can tell you is live for today because no one is promised tomorrow..

  • Report this Comment On April 18, 2014, at 11:03 PM, originalcyn wrote:

    I expect financial advice and analysis from this site, but wisdom, the rarest of commodities, is not something I necessarily expect to find here. Like the fool in Lear, you have arrived at truth. Fool on!

  • Report this Comment On April 19, 2014, at 1:06 AM, TENOFWANDS wrote:

    HAPPINESS ITSELF is not a viable goal; it is a by-product of doing one's best at something meaningful. The Human Potential Movement seems to have missed this point; anyone who actually understood what is meant here would never be compelled to write books about happiness.

  • Report this Comment On April 19, 2014, at 4:02 AM, Lyle1969 wrote:

    Another excellent article Morgan. This is the whole premise of Covey's points about 'habits of success.'

    There are too many uncontrollable variables in life for us to measure our success or failure by various goals. Rather, we should be governed by principle driven habits, systems to use your word. That kind of lifestyle will adapt to our changing life and keep us on track to reach true success.

    When applied to the financial arena, principle driven habits/systems will guide us to 'success' there as well.

    At the same time, any effective system has intelligent benchmarks that indicate performance. Smart goals remain useful, but should be seen for what they are, indicators of progress, not the end itself.


  • Report this Comment On April 19, 2014, at 5:34 AM, Jez23 wrote:

    Good for starters. But in my view all investors need to understand the concepts of noise, randomness and black swan events.

    Suggested further reading: Antifragile by NN Taleb.

    Its heavy going til you get to about p.150. I am in Spain reading it on kindle. Should probably have read his books Fooled by Randomness, and the Black Swan first. I shall buy paper copies of all 3 when I get back to the uk.

    I have always been perplexed by the insistence on goals and deadlines before having a good understanding of the issues and problems embedded in the task

  • Report this Comment On April 19, 2014, at 8:41 AM, sillygoose wrote:

    I completely agree with the concept of this article. Very often when you set goals they become obstacles that intimate, frustrate and lead to just giving up. I think it is fine to set a general goal and then forget about it. Do what needs to be done everyday and the goal will be achieved without thinking about.

    I have lived this way for a long time and I have achieved just about everything I have set out to do, never once thinking about it as a set goal.

    My 8 year old daughter has been learning to play the piano since she was 4. She often gets frustrated, crying that it is hard. I tell her one of my favorite sayings; How does a mouse eat an elephant? The answer is, one bite at a time.

    Her piano playing is getting better all the time. I never thing about her becoming a famous pianist. I just want here to learn the habits to succeed.

  • Report this Comment On April 19, 2014, at 9:56 AM, msm3rd wrote:

    My sister died of breast cancer when she was 48. My life changed at that point because we are not guaranteed a future at all. Enjoy now. Save what you can along the way so that you can enjoy the tomorrows you are blessed with.

  • Report this Comment On April 19, 2014, at 10:17 AM, Wyechas wrote:

    Morgan, thank you so much.

  • Report this Comment On April 19, 2014, at 8:45 PM, richie54 wrote:

    Good advice, as usual, Morgan. I've always said this same thing to my co-workers, "Whatever you do, find the right system of doing it."

  • Report this Comment On April 19, 2014, at 9:59 PM, KBecks wrote:

    I participated in a Fool phone survey and the first question was, what is your goal? I said I just hoped to become financially independent as soon as possible, and that we were working on our savings rate and conservative investments / asset preservation to get there.

    I love the thought of a repeatable, successful system. For us, that will involve how we use some of the Fool services we subscribe to.

  • Report this Comment On April 19, 2014, at 11:23 PM, martcoop wrote:

    Thanks for the article. I guess I must have settled on systems a few years ago because I couldn't figure out how to set goals. Who knew that was a better way?

  • Report this Comment On April 20, 2014, at 10:35 AM, JPMillerHOU wrote:

    I thought the reason for setting a financial goal was so that one could in every transaction determine if a specific action would be expected to take one toward that goal or away from it and then act accordingly. That IS a system.

    Why would one set the goal of going to Atlanta and then never turn onto the road to Atlanta. Why would someone set the goal to become a millionaire and not take the steps of productiveness, frugality and considered investment?

  • Report this Comment On April 20, 2014, at 10:50 AM, lstirtz wrote:

    I do executive coaching and finally I have heard a voice in the wilderness, I use the term models. I have a strong bias when plans get to detailed far out and time consuming, or goals do the same, budgets are one of the most destructive forces in business a tremendous energy waster and a blindfold besides, no one looks up only at the goal or budget. Hooray for you for bringing some sanity to the table.

  • Report this Comment On April 21, 2014, at 12:04 AM, mj2boogie wrote:

    Woweee! I never knew I had systems. I thought they were goals. And the whole time they were really systems!! I never thought about it that way, but looking back now, it is so clear that they really were systems. Guess that is why they worked so well!! Glad someone could 'splain it to me, so I could see what it was I was really doing!!

    Thanks for the great (as usual) article. Love the way they make me see the world a little different!!


  • Report this Comment On April 21, 2014, at 8:05 AM, mikecart1 wrote:

    The same applies to fitness. Many people go about changing their health and fitness with goals - which is incorrectly taught. "Lose 20lbs" means very little. Instead people should change their eaitng habits for good.

  • Report this Comment On April 21, 2014, at 10:21 AM, bamasaba wrote:

    Goals and systems go hand in hand. You set the goal and then design a system to achieve said goal. In fact, part of the goal setting process is creating a plan for how you will achieve it, i.e. devising the system. Of course adjusting goals as circumstances change and ensuring that goals are realistic is also important.

    If you just start making systems without having any idea of what you are trying to accomplish you will be just as lost in the sauce.

    This article mainly shows that anything can be straw-manned.

  • Report this Comment On April 21, 2014, at 2:08 PM, daveandrae wrote:



  • Report this Comment On April 21, 2014, at 4:25 PM, Funwithmon wrote:

    This made so much sense. Thanks.

    I didn't understand the dollar cost averaging comment in "If not dollar-cost averaging, then waiting until attractive investments arise, however long that takes."

    I would love to see more detailed example systems M.H. thinks are good ones.

    I would love a way to favorite an author somewhere so I can have a system (outside of my head) to remember and refer to stuff I think is great here on the Fool site.

    Is that spam by Dend1950 in the comments?

  • Report this Comment On April 22, 2014, at 9:03 AM, tchams wrote:


    My portfolio was down around 10% and suddenly the goal on my budget website stated I was way behind schedule.

    This may have caused me to panic if I did not believe in the system of saving I have put into place and relied only on returns.

    Thanks Mr. Housel and Fool On

  • Report this Comment On May 16, 2014, at 2:47 AM, marexartb wrote:

    100% agree. Have been practicing this for some years now and it changes the focus and decisions made significantly.

  • Report this Comment On May 26, 2014, at 11:40 AM, dpjordan wrote:

    Less stress and more quality of life and quality of life doesn't always translate to having more stuff. Thanks for the article and thoughts that go with.

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Morgan Housel

Economics and finance columnist for Analyst, Motley Fool One.
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