Why I Don’t Set Financial Goals (and What I Do Instead)

Most people set financial goals. After all, that’s what most “gurus” advise.

The goal to have a salary of X dollars by age 30. To own a house by age 35. To be a millionaire by age 40. To be able to afford a lake house by age 50. And on and on.

I used to follow similar logic. When I was still in school, I had all sorts of long-term financial goals for myself. But then I stumbled across a counterintuitive insight:

When it comes to money, systems are superior to goals.

There’s a key fundamental difference between the two. A goal is a hope-filled aspiration with a deadline. A system is an ongoing process or routine for getting something done. Gaining 10 pounds of muscle is a goal; your exercise regime is a system. Becoming a world-class musician, surgeon, or investor is a goal; your game plan for improving your capabilities is a system.

In other words, goals loom in life’s windshield, but they don’t prescribe a method for accomplishment. That can be problematic, because people often respond to financial goals (especially shorter-term ones) with risky reactions. For example, if you really wanted to double your money in the next 12 months, you might resort to investing in extremely risky entities that could just as easily lose you everything. Even if you ended up right, doing so probably wasn’t a smart idea.

Most goals are also completely arbitrary when it comes to timing. Let’s say your goal is to write 150 pages in the next five days. Are those 5 Earth spins really the best metric to be using? Doubtful. The same idea applies to money. Wall Street obsesses over the corporate quarterly earnings cycle, but if you step back and think about it, aren’t those 91 Earth spins kind of an absurd measurement device? I care infinitely more about what my companies are doing — how they’re operating, what their plans are — than whether the random time snippet of performance edged out or missed unreliable analysts’ expectations. I think the exact same way with my personal finances, too.

Additionally, financial goals can trip you up. A goal-based mindset assumes life is more linear and predictable than it actually is. History is written by randomness, and goals rarely accommodate the unforeseeable. As global interconnectedness expands and innovation accelerates, randomness will show up more frequently than ever. Some big event in five years may totally change where you live, what you’re doing, and how much you’re earning. Or maybe economic volatility will force you to fall short of a financial end goal. Who knows. Life happens, and that’s okay.

Plus, as legendary angel investor and CEO of AngelList, Naval Ravikant, once tweeted, “Desire is a contract you make with yourself to be unhappy until you get what you want.” This is something I still struggle with daily, but shifting my mindset to revolve more around systems instead of goals has absolutely helped me be happier.

The pitfalls of financial goals underscore the benefits of systems. Systems become habits that don’t make you think. They’re less beholden to arbitrary timing. They’re sources of consistency in a tumultuous world. And if followed, systems lead to great long-term outcomes, perhaps outperforming whatever goal you would’ve set instead. Systems simply work.

Here’s a condensed view of my personal finance system:

  • I live well within my means, saving a significant portion of each paycheck received. This means purposefully minimizing my largest expenses (within reason) and not caring much about accumulating things.
  • I invest those savings fairly consistently into the best investment ideas I can find (generally stocks). I have no plans of touching this money anytime soon; it’s sole purpose is to multiply over however many years until I feel like using it.
  • I strive for flexibility. Flexibility leads to optionality, and optionality builds antifragility. I manage my money in a way that leaves my options wide open.
  • I keep a cash cushion in case something in my life hits a rough patch.
  • I maintain an entrepreneurial outlook, waiting to seize whatever big opportunities or ideas cross my path. I’m always open to new ideas, patient to act, but ready to move swiftly when opportunity strikes.
  • I spend a significant chunk of time reading books/articles and listening to podcasts to get smarter, and I spend at least 10 hours a week developing new skills. Ideally, this helps me be more capable in the points above.

Your system may look similar; however, each of us is different, so if you’re trying to think through what yours might look like, don’t obsess over mine. Let your system reflect whatever brings you a long-term sense of fulfillment. At the minimum (financially speaking), this is probably all anyone really needs:

  • Live beneath your means.
  • Keep a cash cushion for a rainy day.
  • Transfer a certain percentage of each paycheck into an index fund.
  • Be patient. Go live your life while your money works for you.

That’s it. Any personal tweaks and non-financial additions are up to you.

Lastly, while financial goals aren’t generally fantastic ideas, that doesn’t mean all goals are bad. Of course, goals don’t accomplish themselves, but that doesn’t mean you can’t want or aim for things. I still have goals and aspirations: I want to visit all 7 continents, gain more freedom in life, win a donut eating contest, and spend more time with friends. The key is to focus less on personal vision, and more on generating a solid, consistent game plan. If you can do that, then your life is in good hands.